[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]






 
                        COMBATTING THE ECONOMIC


                           THREAT FROM CHINA

=======================================================================

                                HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION

                               __________

                            FEBRUARY 7, 2023

                               __________

       Printed for the use of the Committee on Financial Services

                            Serial No. 118-1
                            
                            
     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
     
     
     
     
                                 ______
     
                  U.S. GOVERNMENT PUBLISHING OFFICE 
      52-357          WASHINGTON : 2023
 
     
                        
                            
                            
                            

                 HOUSE COMMITTEE ON FINANCIAL SERVICES

               PATRICK McHENRY, North Carolina, Chairman

FRANK D. LUCAS, Oklahoma             MAXINE WATERS, California, Ranking 
PETE SESSIONS, Texas                     Member
BILL POSEY, Florida                  NYDIA M. VELAZQUEZ, New York
BLAINE LUETKEMEYER, Missouri         BRAD SHERMAN, California
BILL HUIZENGA, Michigan              GREGORY W. MEEKS, New York
ANN WAGNER, Missouri                 DAVID SCOTT, Georgia
ANDY BARR, Kentucky                  STEPHEN F. LYNCH, Massachusetts
ROGER WILLIAMS, Texas                AL GREEN, Texas
FRENCH HILL, Arkansas                EMANUEL CLEAVER, Missouri
TOM EMMER, Minnesota                 JIM A. HIMES, Connecticut
BARRY LOUDERMILK, Georgia            BILL FOSTER, Illinois
ALEXANDER X. MOONEY, West Virginia   JOYCE BEATTY, Ohio
WARREN DAVIDSON, Ohio                JUAN VARGAS, California
JOHN ROSE, Tennessee                 JOSH GOTTHEIMER, New Jersey
BRYAN STEIL, Wisconsin               VICENTE GONZALEZ, Texas
WILLIAM TIMMONS, South Carolina      SEAN CASTEN, Illinois
RALPH NORMAN, South Carolina         AYANNA PRESSLEY, Massachusetts
DAN MEUSER, Pennsylvania             STEVEN HORSFORD, Nevada
SCOTT FITZGERALD, Wisconsin          RASHIDA TLAIB, Michigan
ANDREW GARBARINO, New York           RITCHIE TORRES, New York
YOUNG KIM, California                SYLVIA GARCIA, Texas
BYRON DONALDS, Florida               NIKEMA WILLIAMS, Georgia
MIKE FLOOD, Nebraska                 WILEY NICKEL, North Carolina
MIKE LAWLER, New York                BRITTANY PETTERSEN, Colorado
ZACH NUNN, Iowa
MONICA DE LA CRUZ, Texas
ERIN HOUCHIN, Indiana
ANDY OGLES, Tennessee

                     Matt Hoffmann, Staff Director
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    February 7, 2023.............................................     1
Appendix:
    February 7, 2023.............................................    87

                               WITNESSES
                       Tuesday, February 7, 2023

Ashooh, Richard, Corporate Vice President, Global Trade and 
  Government Affairs, Lam Research Corporation...................     5
Feddo, Thomas P., Founder/Principal, the Rubicon Advisors LLC....     7
Harrell, Peter E., former Senior Director for International 
  Economics and Competitiveness, National Security Council and 
  National Economic Council......................................    12
Lorber, Eric, former Senior Advisor to the Undersecretary for 
  Terrorism and Financial Intelligence, U.S. Department of the 
  Treasury.......................................................     8
Willems, Clete R., Partner, Akin Gump Strauss Hauer & Feld.......    10

                                APPENDIX

Prepared statements:
    Ashooh, Richard..............................................    88
    Feddo, Thomas P..............................................    92
    Harrell, Peter E.............................................    96
    Lorber, Eric.................................................   104
    Willems, Clete R.............................................   113

              Additional Material Submitted for the Record

Hill, Hon. French:
    Opinion piece from The Hill entitled, ``Build back nuclear,'' 
      dated March 1, 2021........................................   129
    Responses to questions for the record submitted to Eric 
      Lorber.....................................................   132
Garcia, Hon. Sylvia:
    ``China's Engagement in Latin America: Views from the 
      Region,'' United States Institute of Peace, dated August 8, 
      2022.......................................................   133
Waters, Hon. Maxine:
    Letter to Chairman Patrick McHenry, dated February 7, 2023...   138


                        COMBATTING THE ECONOMIC



                           THREAT FROM CHINA

                              ----------                              


                       Tuesday, February 7, 2023

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:06 a.m., in 
room 2128, Rayburn House Office Building, Hon. Patrick McHenry 
[chairman of the committee] presiding.
    Members present: Representatives McHenry, Lucas, Sessions, 
Posey, Luetkemeyer, Huizenga, Wagner, Barr, Williams of Texas, 
Hill, Loudermilk, Mooney, Davidson, Rose, Steil, Timmons, 
Norman, Meuser, Fitzgerald, Garbarino, Kim, Donalds, Flood, 
Lawler, Nunn, De La Cruz, Houchin, Ogles; Waters, Velazquez, 
Sherman, Meeks, Scott, Lynch, Green, Cleaver, Foster, Beatty, 
Vargas, Gottheimer, Casten, Pressley, Horsford, Tlaib, Torres, 
Garcia, Nickel, and Pettersen.
    Chairman McHenry. The Financial Services Committee will 
come to order.
    Without objection, the Chair is authorized to declare a 
recess of the committee at any time.
    Today's hearing is entitled, ``Combatting the Economic 
Threat from China.''
    I want to thank our panel for being here.
    I now recognize myself for 3 minutes to give an opening 
statement.
    The actions of the Chinese Communist Party (CCP) last week 
serve as a clarifying moment that China is not an ally or a 
strategic partner. They are our competitor and pose the single 
greatest threat to America's global standing. This committee is 
holding our first hearing of the Congress on combatting the 
economic threat from China. This is a priority for the 
Congress, and our committee's jurisdiction is central to this 
discussion.
    The economic strength and vibrancy produced by our system 
of free market capitalism directly fuels America's military 
strength and cultural power, whether it is through sanctions, 
export financing, international financial institutions, or our 
capital markets, all of which fall under this committee's 
jurisdiction. This committee will lead this Congress' economic 
agenda and response to China. This agenda must maintain trust 
and confidence that our system will continue to grow capital 
resources, industrial capabilities, and new technologies. In 
other words, we must double down on our commitment to free 
people in free markets.
    The juxtaposition between the United States and China could 
not be more clear. They are centralized. We are decentralized. 
They are closed. We are open. They suppress free speech and 
human dignity. We embrace it. These are the American values 
that produce the economic strength that has led to the highest 
living standard and greatest military power in human history.
    Last Congress, Committee Republicans laid out principles 
for how we should attack the economic parasite of China without 
sacrificing the host, which is our free market system. First, 
we must walk the walk. For the U.S. to compete with China, we 
cannot become more like the Chinese Communist Party. We need to 
carefully evaluate if a policy proposal could jeopardize 
America's ability to innovate, grow, and allocate capital, or 
if it would cause our allies to question our commitment to free 
people and free markets.
    Second, the United States and its allies must prevent China 
from rewriting the international rules of the road. We should 
reject policies that allow China to ignore debt transparency 
and multilateral standards with impunity, or allow them to 
exert a malign influence on the international financial 
institutions.
    Finally, the United States must lead by example. Our 
national security requires the U.S. financial sector to remain 
open, vibrant, and resilient, even as we prevent Chinese 
companies from advancing Beijing's strategic ambitions. If we 
stick to these principles, and reinforce American values rather 
than undermine them, we can outcompete China on the global 
stage. I yield back.
    The Chair now recognizes the ranking member of the 
committee, the gentlewoman from California, Ms. Waters, for 4 
minutes for an opening statement.
    Ms. Waters. Thank you, Mr. Chairman. As we discuss how to 
bolster our economy and to counter threats from China, I would 
like to start by saying that if House Republicans continue 
their brinkmanship over the debt ceiling, it will result in 
even more severe interest rates hikes, a plunging stock market, 
major job losses, and a recession of epic proportions. Such a 
global financial crisis would hand the Chinese Communist Party 
a massive win by boosting the Chinese government's standing in 
the world.
    We have been down this road before, and there have been 
real harms to our economy in the past just by coming close to a 
default. This committee should be doing everything that it can 
to avoid a calamitous outcome. I believe this is what our 
committee should be focused on.
    And so, I would like to submit for the record a letter that 
I have sent to you, Mr. Chairman, requesting a hearing on the 
economic harm that will be caused by nearing or triggering a 
national debt default.
    Chairman McHenry. Without objection, it is so ordered.
    Ms. Waters. Thank you. I also want to point out the fact 
that anti-Asian-American violence has skyrocketed in the wake 
of the COVID-19 pandemic, fueled significantly by former 
President Donald Trump's dangerous and xenophobic language. 
While we must hold the Chinese government accountable for its 
harmful actions, we have a responsibility to avoid language 
that stokes hatred and fuels xenophobia and violence against 
the Asian-American community. I am proud that last Congress, 
House Democrats led the legislative effort to put an end to 
this violence by passing the COVID-19 Hate Crimes Act.
    Right now, the authoritarian regime of the Chinese 
Communist Party is trying to reshape the international order to 
supplant U.S. leadership. We must confront this challenge by 
defending our values and securing our interests globally, and 
that is exactly what Democrats, particularly Committee 
Democrats have done.
    We have taken critical steps to protect our nation's 
security and to ensure that U.S. businesses and our economy can 
successfully compete with China by passing critical legislation 
including: the America COMPETES Act, which has provisions to 
counter the Chinese Communist Party's growing economic 
influence; the longest reauthorization of the Export-Import 
Bank, to preserve and create millions of jobs right here in 
America, and to support American businesses as they compete 
with China; the Anti-Money Laundering Act of 2020, which 
included a government-wide strategy to combat illicit finance; 
the Corporate Transparency Act, to prevent the use of shell 
companies to hide dirty money in the U.S.; the CHIPS and 
Science Act of 2022, to ensure we win the technology race for 
the 21st Century; the Infrastructure Investment and Jobs Act, 
which, for the first time in decades, poured significant funds 
into our aging infrastructure to not only support businesses 
here, but to attract investment from around the world; and the 
Inflation Reduction Act, to finally reassert American 
leadership and displace China as the key supplier of critical 
equipment for the technologies that are needed to fight climate 
change.
    Still, there is more work to do, including making sure U.S. 
companies, like hedge funds, private equity funds, and Wall 
Street, are not investing in ways that hurt our economy or 
funding the adversarial actions of the Chinese government. I 
look forward to hearing from our witnesses about what more this 
committee can do to support our economy. Thank you, Mr. 
Chairman, and I yield back.
    Chairman McHenry. The gentlelady yields back. The Chair now 
recognizes the gentleman from Missouri, Mr. Luetkemeyer, who is 
also the Chair of our Subcommittee on National Security, 
Illicit Finance, and International Financial Institutions, for 
2 minutes.
    Mr. Luetkemeyer. Thank you, Mr. Chairman. For decades, 
China has employed a military-civil fusion national strategy to 
develop the People's Liberation Army into a world-class 
military. This strategy involves the comingling of private 
industry in China and the Chinese military-industrial complex. 
Recognizing this threat, in 2020 President Trump issued an 
Executive Order aimed at curbing U.S. investment into the 
Chinese military-industrial complex, stating, ``The People's 
Republic of China (PRC) is increasingly exploiting the United 
States' capital to resource and to enable the development and 
modernization of its military intelligence and other security 
apparatuses.''
    In addition to funding its military, China continues to use 
their economy to oppress their own people. This oppression 
includes speech suppression of all citizens and the persecution 
of religious and ethnic minorities, including arbitrary 
imprisonment, forced labor, and genocide. In 2021, President 
Biden added to the Trump Executive Order stating, ``The use of 
Chinese surveillance technology to facilitate repression or 
serious human rights abuses constitute unusual and 
extraordinary threats to the national security, foreign policy, 
and the economy of United States.''
    The United States Government seemingly acknowledges the 
national security and economic threat China poses, but we lack 
meaningful action, as we have just witnessed again this past 
weekend with the balloon fiasco.
    As of January 9, 2023, there were 252 Chinese companies 
listed on U.S. exchanges, with a total market capitalization 
over $1 trillion. In 2021, the U.S. trade deficit with China 
was $355 billion. It is hard to put a dollar sign on China's 
theft of intellectual property. Certain estimates put it as 
much as $600 billion a year. It is our committee's job to 
examine all of the interconnections between the Chinese and 
U.S. economies, specifically connections supporting China's 
military and human rights abuses, and to pursue options to 
eliminate U.S. capital flowing into those areas.
    I look forward to today's hearings and the witnesses' 
discussions, and with that, Mr. Chairman, I yield back.
    Chairman McHenry. The gentleman yields back. The Chair now 
recognizes the gentlewoman from Ohio, Mrs. Beatty, who is also 
the ranking member of our Subcommittee on National Security, 
Illicit Finance, and International Financial Institutions, for 
1 minute.
    Mrs. Beatty. Thank you, Mr. Chairman. I concur with Ranking 
Member Waters' points on the importance of avoiding a debt 
default that would deliver a decisive victory to the People's 
Republic of China.
    As we see through the world, for example, in Africa and in 
the Caribbean, China is making deep inroads into our allies' 
economies and cultures, partly in an effort to pull our friends 
away from the United States. We must counter this with the 
tools at our disposal through our voices and our vote in the 
international financial institutions, as well as through other 
activities, such as improving access to the United States-led 
financial system. Thankfully, under the leadership of former 
Chairwoman Waters, Democrats had already made significant 
strides to protect our nation's security and competitiveness by 
passing landmark legislation. I am looking forward to 
continuing this critical work as we look at the international 
issues, and national security, and financial institutions. I 
yield back.
    Chairman McHenry. The gentlelady yields back.
    We now welcome the testimony of our witnesses.
    First, Mr. Rich Ashooh. Mr. Ashooh is a former Assistant 
Secretary of Commerce for Export Administration. He led our 
dual use export control efforts and managed Commerce's national 
security, nonproliferation foreign policy, and strategic 
industrial resources functions within the Bureau of Industry 
and Security.
    Second, Mr. Tom Feddo. Mr. Feddo served as the first 
Assistant Secretary for Investment Security at the Department 
of the Treasury, where he led the drafting of regulations 
implementing the Foreign Investment Risk Review Modernization 
Act (FIRRMA). Mr. Feddo also served as Assistant Director for 
Enforcement at the Office of Foreign Assets Control (OFAC), and 
was an officer in the U.S. Navy's Nuclear Submarine Service. We 
thank you for your service.
    Third, Mr. Eric Lorber. Mr. Lorber served as a Senior 
Advisor to the Undersecretary for Treasury's Terrorism and 
Financial Intelligence Division. Mr. Lorber also has testified 
multiple times before both Chambers of Congress, and we value 
his deep knowledge.
    Fourth, Mr. Clete Willems. Mr. Willems is a trade lawyer 
who understands the landscape of international economic policy 
and the available tools. He previously served as the Deputy 
National Security Advisor and Deputy National Economic Advisor 
in the previous Administration and can provide unique insights 
into the challenges posed by the Chinese Communist Party (CCP).
    And finally, Mr. Peter Harrell. Mr. Harrell was, until 
recently, the Senior Director for International Economic Policy 
with the Biden Administration, and I am sure he will be able to 
provide insights into how the current Administration views 
these matters.
    We thank you all for taking time to be here. Each of you 
will be recognized for 5 minutes to give an oral presentation 
of your testimony. As you all know, red means stop, yellow 
means hurry up, in general parlances, and green obviously means 
go.
    So with that, now that we have discovered colors, the 
colors have action that we should take around them. Mr. Ashooh, 
we will now recognize you for 5 minutes.

 STATEMENT OF RICHARD ASHOOH, CORPORATE VICE PRESIDENT, GLOBAL 
     TRADE AND GOVERNMENT AFFAIRS, LAM RESEARCH CORPORATION

    Mr. Ashooh. Thank you for the ground rules, Mr. Chairman, 
and thank you also for the opportunity to be here. And my 
appreciation to Ranking Member Waters and the committee for 
having this very important discussion. Having served as the 
Assistant Secretary of Commerce for Export Administration at 
the Bureau of Industry and Security, I had both the honor and 
the challenge of weighing many of the same issues that we are 
confronting today in this committee, and it is in that capacity 
that I am testifying here.
    It should be stated at the outset that the concerns at the 
heart of this hearing are well-founded. While great strides 
have been made in addressing these concerns, national security 
and economic threats are never static and must be constantly 
addressed. It is also important to stress early on that U.S. 
global technology leadership remains strong, and that the 
American culture of innovation is the envy of the world. I 
stress this because it is essential for policymakers as you 
consider the challenge of promoting U.S. technology advancement 
while regulating it in the face of potential threats to cause 
no harm to the very thing you are trying to promote and 
protect.
    Much of what has been accomplished in recent years in this 
area has been the result of legislation. This committee had a 
key role in enacting the Export Control Reform Act (ECRA), and 
the Foreign Investment Risk Review Modernization Act (FIRRMA). 
There are lessons from that debate which are still relevant as 
Congress considers new measures, such as an outbound investment 
regime or dramatic changes to FIRRMA or ECRA. While the issues 
associated with regulating financial behaviors or technology 
development are many, I will confine my comments to four 
recommendations that are drawn from the lessons in the effort 
to regulate in this area.
    First, clearly define the national security threat to be 
addressed. The temptation to address a broad panoply of 
legitimate concerns which do not necessarily rise to the level 
of a national security threat is alluring. National security, 
as currently understood in the United States, is already very 
broad, taking into consideration factors such as 
infrastructure, supply chain, and data protection. The best 
tools are well-aimed, and potentially harsh steps taken by 
policymakers should ensure that the target of such action is 
clearly defined.
    Second, regulate horizontally. What do I mean by that? 
National security threats are rarely stove-piped. Solutions to 
address them should not be either. National security threats 
are commonly carried out by individuals or groups funded by 
government with the help of or pursuit of technology. 
Therefore, multiple U.S. agencies and departments must 
collaborate. One of the most critical updates to FIRRMA and 
ECRA was to dovetail their definitions and authorities, 
establishing a unique definition, for instance, of critical 
technologies, and grounding that definition in well-defined 
export control lists. This synchronization is a model for 
enhancing the power and effectiveness of U.S. Government policy 
implementation.
    Third, gaps do exist. Leverage what works to address them. 
For all of the enhancements in recent years to protect U.S. 
technology, gaps do remain. For instance, it is currently 
possible that export control technology could be the 
beneficiary of U.S. financing, intentionally or not. This 
disconnect is one which could be addressed through alterations 
to current authorities. A recent enhancement in the Export 
Administration Regulations defines the term, ``support by U.S. 
persons,'' to include, among other things, financing. While 
further study must be conducted, this feature of the law 
creates a regulatory hook to limit financial activities already 
tied to restrictions based on export controls.
    And finally, just as synchronization among relevant 
agencies and authorities is critical, a high priority must be 
given to alignment with partner nations. Many like-minded 
countries have in place national security views similar to 
those of the U.S., such as the foreign direct investment 
screening and export controls. It is clear from the behavior of 
our allies that the U.S. has led in these areas, resulting in a 
more comprehensive and, therefore, effective approach, and the 
U.S. should continue this leadership. Specifically, the U.S., 
along with key allies, should consider a new method for 
multilateral controls in targeted technology areas that can 
work with, but is separate from the existing multilateral 
regime construct that has served the U.S. and partner nations 
well in the past, but which is ill-suited for complex 
technology supply chains.
    The ad hoc approach currently utilized in the area of 
semiconductors, for example, should be replaced with an agreed-
upon system among a smaller group of stakeholder nations that 
can act in concert, as the need arises, with a full 
understanding of the nature of the technology involved. Without 
such alignment, unilateral policy will ultimately fail in 
combatting both national security and economic threats from 
China. U.S. global technology leadership is indisputable, but 
it is perishable. Hearings like this are essential to 
maintaining it. I am happy to answer your questions.
    [The prepared statement of Mr. Ashooh can be found on page 
88 of the appendix.]
    Chairman McHenry. The gentleman yields back. At this time, 
we will now recognize Mr. Feddo for 5 minutes.

 STATEMENT OF THOMAS P. FEDDO, FOUNDER/PRINCIPAL, THE RUBICON 
                          ADVISORS LLC

    Mr. Feddo. Chairman McHenry, Ranking Member Waters, and 
distinguished members of the committee, I am honored to appear 
today for your first Full Committee hearing of the 118th 
Congress. This is your first hearing that makes clear the 
priorities of the committee and the significance of the current 
geopolitical climate and its impact on our economic security, 
and by relation, our national security. As the chairman 
mentioned, I oversaw the Committee on Foreign Investment in the 
United States, and led the successful implementation of FIRRMA, 
enacted in 2018.
    By virtue of that experience, and roughly 27 years in 
government service, much of it in national security-related 
roles, I hope to contribute to your consideration of how we can 
mitigate the risks to U.S. interests posed by the People's 
Republic of China (PRC), while maintaining strong free-market 
principles. I believe we are engaged in one of history's most 
consequential great power competitions, and that technology 
plays a vital role in that contest. As the chairman also 
mentioned, I was on a Los Angeles class submarine, an 
engineering and technological marvel, a byproduct of our 
innovation ecosystem. That experience has made crystal clear 
the imperative for maintaining America's tech advantage and, 
thus, its lethality on the battlefield.
    The PRC poses grave threats to the United States and its 
allies in the global world order, including its strategy to 
exploit technology, raw materials, market power, and energy 
resources to achieve its ends. Key supply chains, such as 
semiconductors and critical minerals, are vulnerable to these 
same goals. Enactment of FIRRMA and ECRA 5 years ago was a 
response to the potential risks arising from foreign actors' 
activities involving high-tech U.S. businesses. Now, both 
Congress and the Biden Administration are considering a new 
agency with potentially sweeping powers to oversee American 
firms' allocation of resources and capital outside the United 
States.
    A version of this new interagency panel was considered 
while drafting the CHIPS and Science Act. This committee on 
national critical capabilities would have had sweeping power. 
Key terms were broad and undefined, leaving substantial 
latitude to the Executive Branch. Later proposals were somewhat 
narrowed, but I believe more homework is necessary. Similarly, 
media reports indicate the Biden Administration intends to 
establish outbound screening through Executive Order this 
spring. I strongly believe that doing so would be a mistake. 
Rather, Congress is best suited to assess and respond to an 
issue of this complexity, and potential scope and impact.
    There should be no dispute that to ensure America's future 
security, the PRC's theft and misappropriation of tech must be 
prevented. The question is whether a new and potentially far-
reaching bureaucracy is the answer. The debate has taken on a 
presumption that outbound screening is necessary, but decision-
makers would benefit greatly by not rushing into a solution. 
Additional hearings should be held to define objectives and 
determine costs and benefits.
    When a bipartisan Congress and the Trump Administration 
collaborated to make the most extensive changes to the 
Committee on Foreign Investment in the United States (CFIUS) in 
its history, those efforts included roughly a half dozen 
hearings with foreign policy and national security experts, the 
intelligence community, the private sector, and former and 
current Administration officials. Congress and the President 
were, thus, well-informed regarding the gaps they intended to 
fill, the law's reach, and the attendant increases in capacity 
and cost. Afterwards, it took 2 intensive years within an 
existing CFIUS bureaucracy to effectively implement the law.
    Here, outbound screening would be created out of whole 
cloth. FIRRMA decision-makers would be best served by building 
a comprehensive record, exploring whether existing or other 
types of authorities could be less bureaucratic, and costly, 
and more impactful. Existing authorities may in fact offer a 
better cost-benefit solution.
    My written testimony includes a foundational laundry list 
of issues for fulsome congressional examination of outbound 
screening. From my CFIUS experience, a new interagency 
committee would be extremely time- and resource-intensive and 
require substantial effort to build a clear regulatory 
framework. It is in the best interests of national security, a 
strong open economy, and accountable government to get this 
right. The alternative could be an unrestrained bureaucracy, 
wasted time and resources, and an inadequate response to the 
PRC's ominous goals.
    Again, it is my privilege to appear before you today and 
contribute to your consideration of these consequential issues. 
I would be happy to answer any questions. Thank you.
    [The prepared statement of Mr. Feddo can be found on page 
92 of the appendix.]
    Chairman McHenry. Thank you for your testimony. The Chair 
now recognizes Mr. Lorber for 5 minutes.

    STATEMENT OF ERIC LORBER, FORMER SENIOR ADVISOR TO THE 
 UNDERSECRETARY FOR TERRORISM AND FINANCIAL INTELLIGENCE, U.S. 
                   DEPARTMENT OF THE TREASURY

    Mr. Lorber. Chairman McHenry, Ranking Member Waters, and 
distinguished members of the committee, I am honored to appear 
before you today to discuss economic sanctions in the U.S.-
China competition. I come before this committee as an expert on 
sanctions. I have served at the United States Department of the 
Treasury as a Senior Advisor to the Undersecretary for 
Terrorism and Financial Intelligence, and in the private sector 
advising clients on sanctions compliance. These positions have 
afforded me perspective on how sanctions policy is made and 
implemented, as well as how companies around the world adjust 
their business models, strategies, and compliance programs to 
ensure they are meeting their obligations under the law.
    The testimony I am giving today is my personal testimony, 
and not on behalf of any organization or client.
    Over the last 2 decades, sanctions have become a core tool 
of American foreign policy and national security. When properly 
calibrated and judiciously used, they can impact U.S. 
adversaries' behavior and reduce their ability to harm U.S. 
interests around the world. Nevertheless, they are not a silver 
bullet and have real limits.
    In recent years, policymakers in the United States have 
begun employing targeted sanctions against China as part of the 
broader U.S.-China competition. These sanctions have focused on 
control over Hong Kong, human rights in Xinjiang, and limiting 
certain Chinese military-industrial complex companies from 
accessing U.S. capital, among other areas. While the United 
States' use of sanctions against China has so far been limited, 
policymakers have increasingly focused on them as a key foreign 
policy tool in this competition. As Congress and the 
Administration think through the use of sanctions to achieve 
national security and foreign policy objectives in the 
competition, a number of key lessons gleaned from U.S. 
sanctions programs over the last few decades stand out.
    First, defining the objective of sanctions is an important 
first step in any campaign, and the use of sanctions should be 
preceded by an understanding of what sanctions are meant to 
achieve. Then, policymakers can choose the appropriate types 
and scope of sanctions to achieve that objective.
    Second, targeted list-based sanctions can be impactful at 
disrupting particular threatening activity and making it 
harder, costlier, and riskier for our adversaries to access 
U.S. markets. While such targeted sanctions may not change an 
adversary's desire to threaten U.S. national security, they can 
impact the adversaries' ability to do so.
    Third, impactful list-based sanctions require constant 
vigilance by regulators, law enforcement, the intelligence 
community, and the private sector to ensure that the targets 
are unable to evade them. While such efforts to disrupt evasion 
are not always successful, forcing sanctioned parties to engage 
in such surreptitious activity often imposes significant costs 
and increases the risks they face.
    Fourth, expansive programs can have substantial 
macroeconomic impact and make it harder for countries to engage 
in activity that threatens the U.S. and its allies and 
partners. For example, the recent sanctions on Russia have 
reportedly limited Russia's ability to continue to produce 
advanced military equipment in a way that has made it more 
difficult for Russia on the battlefield.
    Fifth, more expansive programs, including comprehensive 
programs, can fail to achieve lofty objectives in certain 
instances, such as the failure to convince North Korea to give 
up its nuclear weapons program.
    Sixth, sanctions are more likely to be impactful when 
access to U.S. markets is more important than access to the 
sanctioned target's markets. For example, in the case of Iran, 
the incentive for potential partners to forsake connections 
with U.S. markets in favor of Iranian markets was very low. 
This dynamic may not hold in the context of China, however. 
China's economy is roughly comparable in size to the U.S. 
economy, and the United States has never waged an aggressive 
sanctions campaign against a country with such an economy.
    Seventh, and finally, sanctions are likely to be more 
impactful when the target country's leadership cares more about 
the negative economic effects than their policy objectives. For 
example, the U.S. Government's efforts to deter Russia from 
invading Ukraine with, in part, the threat of crippling 
sanctions did not change that Russian decision. That is likely 
because Russian leadership did not believe we would impose 
crippling sanctions, thought they could weather them, or were 
willing to pay the cost of sanctions in order to achieve their 
objectives in Ukraine.
    These are important lessons gleaned over the last 20 years 
of the aggressive use of sanctions against U.S. adversaries, 
and relevant when considering the use of sanctions in any 
context, including for the purposes of our discussion today. I 
look forward to answer your questions, and thank you again for 
the opportunity to testify.
    [The prepared statement of Mr. Lorber can be found on page 
104 of the appendix.]
    Chairman McHenry. Thank you, Mr. Lorber.
    Mr. Willems, you are now recognized for 5 minutes.

STATEMENT OF CLETE R. WILLEMS, PARTNER, AKIN GUMP STRAUSS HAUER 
                             & FELD

    Mr. Willems. Chairman McHenry, Ranking Member Waters, and 
members of the committee, thank you for the opportunity to 
testify on the U.S.-China strategic competition.
    The China national security threat has been on full display 
in recent days with the PRC's brazen decision to fly a spy 
balloon over the United States, but the threat from China is 
not confined only to national security. China also seeks to 
challenge U.S. economic and geopolitical leadership and to 
remake the international order with priorities and values that 
differ significantly from our own. Accordingly, the outcome of 
this competition will affect the future of our country and the 
world we live in, and Congress is right to make it a top 
priority.
    In my testimony today, I hope to facilitate the committee's 
development of a strategic China agenda. To maximize our 
chances of success, we should clearly define our objectives, 
consider the broader economic consequences, and coordinate our 
action with allies. Our approach should also be comprehensive 
and not only defensive in nature. We should crack down on 
problematic capital and technology flows, but we should also 
prioritize competitive tax and regulatory policies and double 
down on our comparative advantages, which include a free-market 
economy, democratic values, and a deep network of partners and 
allies in the most vibrant financial system in the world.
    To that end, my testimony will cover the defensive measures 
needed to protect U.S. national security, the need for 
multilateral coordination to ensure these measures are 
effective and do not harm U.S. economic competitiveness, the 
importance of pairing defensive action with offensive measures 
to maintain U.S. economic strength, and the appropriate role of 
bilateral engagement.
    One key defensive tool Congress is considering is whether 
to restrict certain types of outbound investment. On this 
issue, we should assess whether there are gaps in existing 
tools like export controls. If we determine that technology is 
so sensitive that it cannot be exported to China, we should 
ensure U.S. companies are not financing China's indigenous 
development of the exact same technology. But we should stay 
focused on national security and avoid a bureaucratic supply 
chain mechanism like the National Critical Capabilities Defense 
Act.
    We should also expand restrictions on investment and 
Chinese military-industrial complex companies to block private 
as well as public investment that can contribute to China's 
military investment, and enact export control measures on 
advanced technology with military applications. These defensive 
measures are important, but we must realize that they impose a 
cost on the U.S. economy by cutting off a critical market, and 
are only effective if U.S. allies take similar actions, since 
they can provide much of the same capital and same technology 
that we can.
    Given the importance of multilateral coordination, we 
should seek all available avenues to achieve it. Unfortunately, 
the Administration's track record has been mixed, especially 
with respect to recent export control actions on 
semiconductors. Congress should push the Administration to 
rectify the situation as soon as possible. One key upcoming 
opportunity is Japan's G7 host year, which can be used to 
advance coordination on export controls, outbound investment, 
and a range of China-related policy.
    We should also work with allies at the World Bank and the 
IMF to ensure that China is a responsible international 
stakeholder. Enacting defensive measures is a necessary part of 
a successful China strategy, but it is not sufficient. As we 
cut off capital and technology flows to China, we must also be 
creating new opportunities for U.S. companies that are affected 
by these measures. One way to do this is to pursue market 
access trade agreements that cut down barriers to U.S. exports 
in third-country markets to help make up for the lost revenue. 
These agreements are also key for our supply chain objectives, 
including reducing our reliance on China for critical goods.
    In particular, if we want companies to move supply chains 
out of China, we need to provide them with meaningful 
incentives to do so. This is all the more pressing in light of 
China's aggressive pursuit of trade deals, including the 
Regional Comprehensive Economic Partnership (RCEP), which is 
now the largest trade agreement in the world. As a result of 
this deal, it is now easier for 14 other countries in the Indo-
Pacific to link their supply chains with China and with each 
other than with the United States. This is unacceptable. If we 
are serious about competing with China on supply chain issues, 
we need a serious trade policy to match. Congress should 
pressure the Administration to move forward with bilateral 
trade agreements with the United Kingdom, Kenya, and Taiwan, as 
well as to renegotiate the Comprehensive and Progressive 
Agreement for Trans-Pacific Partnership (CPTPP).
    Finally, any winning China strategy requires bilateral 
engagement. While we should crack down on national security-
sensitive trade, we must also realize that China's market 
provides a massive opportunity for our farmers, energy 
producers, and financial services firms, all of whom need to 
sell to China to be globally competitive. Therefore, we should 
engage with China through the Phase One Deal to ensure it is 
playing by the rules and not discriminating against U.S. 
companies.
    Thank you. I look forward to your questions.
    [The prepared statement of Mr. Willems can be found on page 
113 of the appendix.]
    Chairman McHenry. Thank you. Mr. Harrell, you are now 
recognized for 5 minutes.

   STATEMENT OF PETER E. HARRELL, FORMER SENIOR DIRECTOR FOR 
INTERNATIONAL ECONOMICS AND COMPETITIVENESS, NATIONAL SECURITY 
             COUNCIL AND NATIONAL ECONOMIC COUNCIL

    Mr. Harrell. Chairman McHenry, Ranking Member Waters, and 
members of the committee, it is an honor to be here alongside 
so many distinguished colleagues.
    Chairman McHenry and Ranking Member Waters, as you said in 
your opening remarks, America's diplomatic, economic, and 
military competition with the People's Republic of China 
represents an overarching challenge for this decade. The 
current government in Beijing is a competitor that seeks to 
undercut the political, economic, and security interests of the 
U.S. and our partners. We have to outcompete China in the 
economic domain and maintain our technological edge. And yet, 
even as we compete with the PRC, we must also find ways to keep 
lines of communication open, cooperate on shared challenges, 
like reducing greenhouse gas emissions, continue outreach to 
the Chinese people, and keep the door open to ties that benefit 
citizens in both countries.
    In my written testimony, I recommend a three-pillar 
strategy to manage our economic competition. First, the U.S. 
and our allies should continue to promote our technological 
leadership and economic strength. With the CHIPS and Science 
Act, the Inflation Reduction Act, and the Bipartisan 
Infrastructure Law, as well as other pieces of legislation, 
Congress has enacted policies to make transformational 
investments in U.S. technology, in the clean energy economy, 
and in renewing U.S. infrastructure that are critical to 
maintaining our leadership. We need to build on this 
foundation, while encouraging our allies and partners to make 
parallel investments in their technology and industrial bases. 
We need to cooperate with our allies and partners on resilient 
supply chains as well.
    It is equally important that we avoid self-inflicted 
wounds. If the U.S. fails to raise the debt limit this spring 
and we default on our obligations, we risk harm to both our 
domestic economy and our global position. A default would 
undermine global confidence in the dollar and speed up the 
development of alternatives. It would undercut the confidence 
of our allies and partners, and it would give Beijing a 
priceless talking point about the irresponsibility of the 
United States. Congress must ensure that the U.S. does not 
default on our national debts.
    Second, we should protect our technological and economic 
advantages while limiting Beijing's ability to weaponize the 
leverage it has over the U.S. and our partners. We need to 
ensure that U.S. and allied companies and experts do not 
inadvertently provide Beijing an edge in key technologies, give 
the PRC access to our critical data, or create dependencies for 
essential goods and products that the Chinese Communist Party 
could weaponize to its advantage.
    Third, we should deepen our partnerships with existing 
allies while working to strengthen new ones. The U.S. should 
galvanize like-minded multilateral organizations, like the G7, 
and work with distinct groupings of countries to tackle 
specific risks, like semiconductor issues. We should pursue 
multilateral economic deals, including the Indo-Pacific 
Economic Framework, and we need to expand bilateral outreach to 
key emerging markets and swing countries such as India and 
Indonesia to deepen ties as we face a period of long-term 
competition with Beijing.
    In my written statement, I have offered detailed policy 
recommendations across these three pillars. I am going to 
highlight just two. First, we need a comprehensive approach to 
managing the data risks we face from Beijing. The simple 
reality is that the U.S. does not currently have an effective 
legal regime to address and mitigate the data security risks we 
see from the PRC. While we have taken steps to reduce specific 
risks, such as targeting the presence of Huawei and 5G telecoms 
networks, and as we see with the current debate over TikTok in 
the CFIUS process, we need a strategy and new legislation to 
more effectively address data security risks across-the-board, 
as well as a new domestic data privacy law to reduce the volume 
of data collected in the first place.
    Second, I urge members of this committee to examine 
investment flows between the U.S. and China, an issue which my 
colleagues have also discussed. FIRRMA, which Congress passed 
in 2018, established important updates to the CFIUS process, 
and the Chinese military company sanctions list provides a 
valuable tool to limit U.S. investments in the securities of 
specific Chinese companies. But it is time for this committee 
to look at continuing weaknesses in the CFIUS regime, such as 
limits on CFIUS' ability to review certain high-risk greenfield 
investments by Chinese companies here in the United States. I 
also urge both Congress and the Biden Administration to work 
together to establish a narrowly-targeted mechanism to review a 
small number of U.S. investments in China that could facilitate 
Chinese technological capabilities and undermine U.S. national 
security.
    In closing, I want to say that I am optimistic about our 
future. The American people remain innovative and 
entrepreneurial, and with smart policies and hard work, will 
succeed in this era of geopolitical competition. Thank you, and 
I look forward to your questions.
    [The prepared statement of Mr. Harrell can be found on page 
96 of the appendix.]
    Chairman McHenry. I want to thank the panel for their 
testimony, and we will now turn to Member questions. The Chair 
now recognizes himself for 5 minutes for questioning.
    Mr. Willems, the Chinese spy balloon that our Air Force 
shot down this past weekend is just the latest incident 
involving China, and it demonstrates that there is a threat to 
the world that China poses, not just to the United States, but 
to our allies. And to that end, Committee Republicans have 
developed principles on how we approach China, given the fact 
that we have a different world now than the Soviet Communists. 
This is a different regime, with a different set of challenges, 
but central to that premise is that to beat China, the U.S. 
should not become China. So, I just want to ask you a few 
questions along those lines. What would you describe as the 
type of economic policies that could jeopardize our commitment 
to free markets and free people?
    Mr. Willems. Thank you, Mr. Chairman. Let me just say, I 
completely agree with you. There is a reason that China is the 
one chasing to catch up to the United States. We are the envy 
of the world because of the policies we have historically held, 
which value a free market, which value democracy, and all of 
those kinds of principles. I have been concerned about some of 
the policies that have been advocated for, and, in particular, 
if you look at the National Critical Capabilities Defense Act, 
that is the kind of bureaucratic mechanism that we often see 
out of Beijing. I think we need to be surgical and crack down 
on the kinds of capital flows that could contribute to their 
military, but we shouldn't be telling every single private 
sector company what they can and cannot do, and we should not 
be overly broad in the way that we handle that issue.
    Chairman McHenry. Yes. And relatedly, the second principle 
that we put forward is that China must abide by the 
international rules of the road. Can you speak to an area where 
China is diverging from that path of the widely-accepted rules 
of the international economic engagement that we have seen over 
the last 50, 60 years?
    Mr. Willems. There are almost too many to offer in the 2 
minutes and 45 seconds that I have left, but let me just 
highlight a couple in the international institutions. First, 
you look at the World Trade Organization (WTO), where China's 
command-and-control economy is totally inconsistent with those 
principles. I look at the World Bank, where China, who is the 
largest bilateral lender in the world, is also receiving a 
significant amount of loans there. And I look at the 
International Monetary Fund (IMF), where China has refused to 
restructure debt for developing countries. Those are just three 
examples in international institutions where China is an 
outlier.
    Chairman McHenry. What are the policies available to 
Congress to ensure that China does not continue to undermine 
international institutions? What can we do to counter them?
    Mr. Willems. I think it is a combination of things, and in 
my testimony, I tried to make the point that you need to be 
comprehensive, and there are defensive measures you should use. 
I think there are offensive measures where we need to be 
creating new markets. And then, we need to really be working 
with our allies and partners through the existing mechanisms, 
the G7, and then at the IMF, the WTO, and the World Bank to try 
to pressure China to change its behavior.
    Chairman McHenry. Thanks. Pivoting to you, Mr. Feddo, we 
just rewrote the rules of foreign investment in the United 
States. FIRRMA, that was passed just over 4 years ago, was an 
update to the CFIUS process, but that is an inbound flow of 
capital into the United States, and we have a process for that. 
There is now a discussion about expanding that authority to an 
outbound regime of taking U.S. dollars and their investment 
decisions internationally. What risks does an outbound regime 
pose to protecting our national security?
    Mr. Feddo. To our national security or more broadly?
    Chairman McHenry. More broadly. Frankly, it's national 
security, but more broadly than that, our economic capacity.
    Mr. Feddo. Mr. Chairman, the problem is ill-defined at the 
moment, so it is hard to really scope a solution that precisely 
tackles an undefined problem. As Mr. Willems suggested, it 
would be a major economic policy and foreign policy change to 
impose these types of capital controls and may impact global 
capital flows in an unpredictable way, including the extent to 
which foreign investors want to invest in the United States and 
how that potentially subjects them to U.S. jurisdiction.
    The way this was first drafted was incredibly broad, and 
its extraterritorial nature would have been almost unbounded, 
and in that respect, it could have really impacted our 
relationship with our allies and partners. Certainly, as Mr. 
Ashooh has mentioned, doing these types of tools in a 
multilateral way is very important. There are only two 
countries in the world that I am aware of that have outbound 
screening mechanisms_Taiwan and South Korea_and as you are well 
aware, the size of the U.S. economy dwarfs those. So, we really 
have to think through imposing this type of or creating this 
type of mechanism, not to mention the bureaucracy that would 
come with it, and I have deep concerns about how that would 
affect us economically.
    Chairman McHenry. My time has expired, but we can further 
expand on this in written form.
    I now recognize the ranking member of the committee, Ms. 
Waters, for 5 minutes.
    Ms. Waters. Thank you very much, Mr. Chairman. I am focused 
on making sure that our economy is strong and that we are all 
united in ways that would put us in a position to deal with 
China or anyone else who interferes with our ability to carry 
out our democratic commission methods. When Democrats last 
engaged in brinkmanship around whether or not to default on 
U.S. debt, interest rates on U.S. Treasury bonds skyrocketed, 
there was havoc in the stock markets, and government, 
companies, and consumers faced increased borrowing costs. The 
nation's long-term credit rating failed, resulting in an 
unprecedented restriction on the Federal Reserve's ability to 
use its monetary policy tools to define the U.S. dollar and 
stabilize the economy.
    Even though an agreement was reached, and we didn't 
default, Republicans are yet again actively working to risk 
unleashing the same devastation or worse as they did just over 
a decade ago. This time some projections on what would happen 
if the U.S. defaulted on its debt indicate that the global 
economy itself could freeze if the United States' Treasury 
market collapse. Can you explain how allowing the U.S. to 
default on its debt would benefit the Chinese government by 
causing irreversible damage to the U.S. dollar status as a 
global reserve currency? Also, please explain how a default 
would affect American's standard of living and our nation's 
economic standard and political influence across the globe. And 
I am directing this question to Mr. Harrell.
    Mr. Harrell. Thank you very much, Congresswoman. I think 
that a default on the national debt would be catastrophic for 
Americans, and it would be a gift for Beijing. Congresswoman, 
you cited a number of the risks we run domestically with a 
major hit to our economy and to our financial markets, which 
would obviously undermine our economic position vis-a-vis 
Beijing, as well as harming Americans here at home. I think it 
would also undercut our view with our allies and partners who 
count on us for all kinds of things and would take the view 
that if we can't even honor our debts, how can they count on us 
for their security and to uphold our alliances? And I think it 
would give Beijing a kind of priceless talking point about how 
irresponsible the United States is that it can't even pay its 
basic obligations.
    I guess a final point I would make is I do think and I know 
there is legislation in front of this committee to deal with 
kind of the role of the dollar. I am a huge believer that it is 
important for the dollar to remain the world's reserve currency 
and the global kind of medium of finance. That whole agenda 
would be massively undermined as well if we defaulted on our 
debt.
    Ms. Waters. Thank you very much. Several years ago, I 
worked with my Republican colleagues to reform the Committee on 
Foreign Investment in the United States (CFIUS) to strengthen 
our tools to prevent adversaries from purchasing key assets in 
the United States. Last November, this committee held a hearing 
that examined outbound capital flows of U.S. dollars flowing to 
foreign adversaries, particularly China, and the impact of 
those investments on our national interest. Several of the 
witnesses argued for our Federal panel to review and, if 
necessary, restrain certain types of outbound investments, like 
the controls we impose through CFIUS. The witnesses testified, 
as have others, that while national security considerations 
should be paramount in such a review, it should not be strictly 
limited to national security. Could you discuss the merits of 
creating an outbound investment review panel? What are some of 
the key elements of such a process?
    Mr. Harrell. Thank you very much. As several of my 
colleagues and I have testified, I do think it is important 
that the U.S. have the authority to review a very narrowly-
targeted set of U.S. investments in China. The reality is, for 
example, when we are investing in semiconductors here and we 
are limiting exports of semiconductor companies to China, U.S. 
companies can still invest in a Chinese semiconductor company 
to help that company develop its own technology. There is 
clearly a gap in the regime, and I think we need a narrowly-
targeted regime with the authority to close those kinds of gaps 
that we have in our national security apparatus currently.
    Ms. Waters. Thank you very much. I yield back.
    Chairman McHenry. I now recognize for 5 minutes the dean of 
the committee, Mr. Lucas, who is also the Chair of the House 
Science, Space, and Technology Committee.
    Mr. Lucas. Absolutely, Mr. Chairman, and I want to thank 
our witnesses for offering their expertise, and I thank you for 
holding this important hearing.
    It has been nearly a year since the invasion of Ukraine, 
and the ongoing war has brought the U.S. and our allies 
together in a series of unprecedented economic sanctions 
against Russia. This offers a glimpse at what the international 
response might be in case of Chinese aggression against Taiwan.
    Mr. Lorber, could you describe the lessons the Chinese have 
learned from the Russian invasion of Ukraine and how China is 
responding to protect itself from potential sanctions?
    Mr. Lorber. Thank you, sir. I appreciate the question. I 
can't describe the specific Chinese response to what the Russia 
sanctions campaign looked like, but I can say that a few 
lessons that came out of the Russian invasion and the 
associated U.S. response are particularly noteworthy. One is 
that to the Biden Administration's credit, they did put 
together a very expansive multilateral campaign that has, over 
time, done significant damage, I think, to the Russian economy, 
maybe not as much as folks wanted it to for a variety of 
reasons, but has done significant damage, and degraded its 
military capability.
    At the same time, however, I think it is fairly widely 
understood and fairly obvious that the threat of Russia 
sanctions in the lead-up to the Russian invasion were 
insufficient to deter the Russian decision. So I think, at 
least in terms of when thinking about an aggressive, massive 
sanctions campaign in any scenario, that those two principles 
need to be kept in mind. One, yes, they can be impactful in 
terms of hurting an adversary's economy, but two, they may not 
change that adversary's decision-making.
    Mr. Lucas. Fair point. Chinese state-owned banks are used 
to expand China's One Belt One Road Initiative and regularly 
saddle unsustainable debts on developing countries. For 
example, the Export-Import Bank of China and the China 
Development Bank have lent billions of dollars to Sri Lanka, 
which faces, of course, a debt crisis with no end in sight. 
African nations, such as Ethiopia, Zambia, and Kenya, also face 
uncertainty with massive debts from China.
    Mr. Willems, could you speak to the global economic 
challenge that Chinese debts place on developing nations?
    Mr. Willems. Thank you for the question, and I agree with 
your premise that this is a major concern and a major threat. 
And while I was on the National Security Council, we saw 
numerous instances where China would get a country knee-deep in 
debt, and then in exchange for debt relief, would seize a 
strategic asset, and that is a national security threat to the 
United States.
    One of the responses that we had in the Trump 
Administration was the BUILD Act, which was intended to make 
the Development Finance Corporation (DFC) much more robust in 
its ability to provide a meaningful alternative to China's 
investments. And I think so far, the track record on that 
agency in carrying out that strategic mission has been a little 
bit mixed.
    One of the things I talked about in my testimony is 
improvements that we can make at the DFC, ensuring that it has 
equity authority that can be used to make investments to 
countries instead of China, as well as looking at creating a 
program there similar to what we have at EXIM, which is the 
China & Transformational Exports Program (CTEP), which cuts 
through some red tape and makes it easier for us to be 
strategic. So, I think we need to look at DFC, we need to look 
at Ex-Im, and use both of those tools to provide an 
alternative. And then in the meantime, I talk a little bit 
about at the IMF and other places where we need to pressure 
China to restructure those debts for developing nations.
    Mr. Lucas. Continuing along on the discussion about the 
imperative of the U.S. being able to displace Chinese 
financing, would you expand a little bit more on the importance 
of the U.S. having a dependable Export-Import Bank as an 
alternative to Chinese? We have had major discussion in recent 
years in this body over that very topic.
    Mr. Willems. Absolutely. I think EXIM needs to play an 
increased role here. And if you look at the landscape 
internationally, and if you look at what China provides for its 
companies, and let's take telecom infrastructure as a good 
example, if you look at Huawei and companies like that, they 
are usually being sold at about a 30-percent discount to 
Western competitors. And it is very difficult for countries to 
basically say, I am going to pay 30 percent more. I hear you on 
the national security threat, but I am still going to say we 
need to have an alternative to that. The China & 
Transformational Exports Program (CTEP) is a good step forward, 
and I think the committee was right on with creating that, and 
I think that we need to further bolster EXIM to be an effective 
tool in that regard.
    Mr. Lucas. Thank you, Mr. Willems. I yield back, Mr. 
Chairman.
    Chairman McHenry. Thank you. I will now recognize the 
gentlewoman from New York, Ms. Velazquez, who is also the 
ranking member of the House Small Business Committee, for 5 
minutes.
    Ms. Velazquez. Thank you, Mr. Chairman. Mr. Harrell, 
building on what Ranking Member Waters was saying, Chinese 
government bonds are, on issue, $3.3 trillion less than half 
the value of U.S. Treasuries held by foreigners. But do you 
believe playing around with the debt ceiling as the Republicans 
are doing will cause foreign governments to move away from 
Treasuries and possibly into Chinese bonds?
    Mr. Harrell. Thank you, Congresswoman, for the question. I 
do think that a debt default and even sort of serious 
brinksmanship does undermine confidence by investors, whether 
sovereign investors or private investors in Europe and 
elsewhere in the U.S. Treasury market, and I do think that will 
have long-term adverse consequences to our Treasury market. I 
am not sure that investors would go into China as they exit 
U.S. bonds. China obviously has a bunch of capital controls, 
and there are reasons why, in the markets, they may not do 
that. But I do think it will undermine the kind of preeminence 
of the U.S. financial system if we have serious brinksmanship 
here.
    Ms. Velazquez. And, Mr. Harrell, the Chinese economy faces 
several challenges that predate the pandemic, including 
significant levels of corporate debt, which reached $29 
trillion in the first quarter of 2022, the highest in the 
world. There have also been concerns with the debt levels of 
its real estate sector, wealth management products, and local 
governments, as well as its off-balance lending activities. Do 
you see China's high level of debt, particularly corporate 
debt, as a significant problem for the world's economy? What 
impact could China's debt levels have on American companies 
invested in China?
    Mr. Harrell. I think it is important that as we think about 
China's policies, we all recognize that China, although a 
serious competitor, and by far our most significant economic 
competitor, is not 10 feet tall. It is not some sort of 
mythical beast that we cannot outcompete. I think you have 
highlighted a couple of the reasons, Congresswoman, why that is 
the case. They do have high levels of debt. They also have 
serious long-term demographic problems, to having a shrinking 
working-age population. I do think that it will be interesting 
to see as China comes out of COVID, if they are able, in fact, 
to hit the growth targets they are trying to hit this year 
without further increasing their debt problem. And I think we 
should be keenly aware of the potential financial risks that 
could come from an unwinding of Chinese debt.
    Ms. Velazquez. Mr. Harrell, repeated lockdowns slashed 
China's growth rate to 3.0 percent in 2022, a pace below the 
global average for the first time in more than 40 years. While 
the IMF is predicting that China's economy will expand by 5.2 
percent in 2023, it will slow again in 2024. Some have argued 
that China's uneven economic performance since the pandemic 
enhances our leverage over China, and now is an opportune 
moment to further address many of the trade imbalances and 
systemic issues American business face in China. Can you 
explain whether this is a view you share?
    Mr. Harrell. I think the last couple of years have been a 
real wake-up call for businesses, both in the U.S. and in 
Western allies that have been doing business in China. I think 
they have seen how China's mishandled response to COVID 
disrupted supply chains. I think they have seen a long-term 
trend of slowing growth in China. I do think this year, China 
is going to probably have a reasonably high rate of growth as 
it bounces back from COVID, but we are not going to see a 
return to many years of 6, 7 percent growth in China. And, of 
course, I think people have seen the geopolitical risks that we 
see with China, and the recent balloon incident only highlights 
those. So I think you are beginning to see a very significant 
corporate rethinking of the role companies want to have in 
China and the risks they face there.
    Ms. Velazquez. Thank you, Mr. Chairman. I yield back.
    Chairman McHenry. The gentlewoman yields back. The Chair 
now recognizes Mr. Sessions for 5 minutes.
    Mr. Sessions. Mr. Chairman, thank you very much. Mr. 
Chairman, your opening statement, I think, outlined very 
clearly not only the role of America, but how we see our 
divisions with China. In my opinion, and I would like to ask 
your opinion, I believe that evidence abounds that China has a 
plan that we saw, or at least I saw, as early as 1996 with 
Johnny Chung, and that was to come and disrupt not only 
American commerce, but to influence policymakers, meaning the 
White House. I think that China's views abound and that we 
already see exactly that they not only have a plan, but they 
intend to counter and compromise the United States of America.
    Mr. Willems, or Mr. Lorber, what about us looking at this 
on a comprehensive basis as opposed to seeing the 50 or 60 
different points that China is countering not just the United 
States, but freedom and capitalism? How do we go and develop 
this, because we saw what President Trump did: he took on the 
Chinese. Successful or not, I think it highlighted that we have 
a problem. Could either one of you begin that discussion about 
what kind of comprehensive viewpoint we really need to take 
because it is militarily, intelligence, economic, and their own 
plans?
    Mr. Willems. Thank you, Congressman, and it is a great 
question. And I agree with you 100 percent that China does pose 
an existential threat that requires our attention and that our 
response has to be comprehensive, and we have to look at all 
facets of what we are doing in the United States. And that does 
include some of the things that this committee is focused on in 
terms of cracking down on problematic capital and technology 
flows, but it also requires us to be offensive, and when we 
close down markets for our companies, we need to open up other 
markets for them. And then, we need to work with our allies and 
partners to make sure that they are taking similar action, that 
they view the threat in the same way, so that the things we do 
are actually effective and don't just hurt us without hurting 
China. That is really important. And I think this committee 
needs to look holistically at all of the different things that 
we need to do, both offensive, defensive, and internationally.
    Mr. Sessions. Okay. Let's suppose this committee does have 
a position at least in capitalism and the markets and the 
opportunity to view those. I think I am talking about within 
Article II, an Administration that has intel, military, 
certainly Treasury, those economic viewpoints. Does this fit at 
the National Security Agency (NSA)? Does that exist today? Do 
we actually have a plan?
    Mr. Willems. It is the role of the National Security 
Council (NSC) to try to coordinate policy across the U.S. 
Government on behalf of the President and to make sure that it 
is effectively addressing these problems. I think that we have 
tried very hard to come up with a strategic plan here, and I 
think that the Trump Administration and then the Biden 
Administration as well has been focused on China. I don't 
believe that the current Administration's plan is comprehensive 
enough, and one of the areas where I do think that they are 
falling short is with respect to trade.
    And I talk in my testimony about China's assertiveness in 
going around the world and collecting trading partners to make 
it easier to link supply chains with China, and we don't have a 
response to that. I do think that the Administration is trying, 
but I think they have fallen short in that respect, and that if 
we want to reduce our supply chain resilience in China, if we 
want to provide a meaningful economic alternative to China, 
that requires trade agreements, and we haven't seen that.
    Mr. Sessions. I think what you said is very interesting. I 
watched over the last few years the Millennium Challenge 
Corporation as it placed economic advantages to countries that 
we wanted to help build their economy, the free market and the 
rule of law, and the Chinese simply glommed on around them with 
their own plan. So, I hope that we push this committee 
appropriately to push the Administration to push this Congress 
to do exactly what we talked about: a comprehensive plan. I 
want to thank each of you. And Mr. Chairman, I yield back.
    Chairman McHenry. The gentleman yields back. Mr. Sherman of 
California is now recognized for 5 minutes.
    Mr. Sherman. Thank you. I want to associate myself with the 
comments of the ranking member, first, that we have to watch 
for xenophobic attacks on Asian-Americans. We are here to talk 
about the Chinese Communist Party. And second, that the most 
important thing we can do is manage our own economy well, and 
that starts by paying our debts. Our economy is already being 
hurt by this talk of default and not raising the debt limit. I 
want to thank Mr. Harrell for pointing out how important it is 
that the U.S. dollar play this major reserve currency role and 
point out that all of the proponents of cryptocurrency have 
announced that their purpose, if they achieve it, is to 
partially displace the U.S. dollar from that role.
    The Chinese Communist Party obviously believes they can 
invade America's airspace deliberately and notoriously without 
serious consequences. They believe the two parties will simply 
shout at each other, maybe shout a few things at Beijing, maybe 
even adopt some sort of pinprick answer, and then go on. What 
China cares about is Taiwan, trade, and tariffs, the three T's, 
and I think they are confident that we will do little or 
nothing, not only in response to the balloon_it is just a 
balloon_but the much bigger things. Even China's defenders have 
to admit that their obfuscation of the sources and initial 
effects of COVID have cost hundreds of thousands of lives 
around the world, and that their trade policies toward the 
United States have created a new term, or at least it was new a 
few decades ago, ``rust belt,'' to describe what they did to 
the industrial Midwest.
    The problem began in the year 2000 when the United States 
Congress granted Most Favored Nation status to China and entry 
into the WTO. Before that, China was an annoyance, was referred 
to as a slumbering giant. Now, of course, things are much 
different, so we have to look at Taiwan, trade, and tariffs. 
Congress should act to allow Taiwan to buy defense items that 
are still stalled in the Administration. And we should provide 
that immediately and without an executive waiver, and deprive 
China of Most Favored Nation status if it invades or blockades 
Taiwan.
    More to the focus of this committee, we have to require 
every major corporation to set out as a risk factor, what would 
happen to that company if there was a breakdown in the U.S.-
China economic relationship? I am not saying that will happen, 
but it might. It is more likely than some of the other things 
that they talk about and the risk factors. By doing that, 
American companies will compete for capital by creating 
resiliency toward what China might do, and in doing that, they 
become less desperate to tell us not to do anything to China. 
And if we do anything serious at all, we have an automatic, 
say, 20 percent tariff on all Chinese goods if they retaliate 
against us for anything we are doing. Of course, that would be 
necessary only if we did anything significant. We probably 
won't.
    One thing that concerns me is China's ability to control 
the behavior of American corporations by handing out access to 
their market the way I hand out dog treats to my pet. Morgan 
Stanley was told, you better tell your investors to put 15 
percent of their money in China or you won't be able to do 
business in China. More specifically, Hollywood, which I 
represent, is told that you can get only 40 movies into China 
in any one year. What does that mean? That means that if you 
make a movie about Tibet, it is not going to show in China. 
That means if you make a movie about Tibet, none of your movies 
are going to go to China, and the CEO's bonus goes to zero if 
he doesn't lose his job or her job. So, China controls what 
American corporations do. They also, therefore, control what 
their lobbyists do, so they have a control over what Congress 
does.
    And, Mr. Harrell, one proposal, and this would be rather 
extreme, would be to say that we impose a tariff on Chinese 
goods, collect the fund, and award that fund to those companies 
that can show that they have been unfairly treated by China so 
that if you can't get your movie into China because you made 
movies about Tibet, or you won't recommend to your investors 
this or that that China wants, instead of making profits in 
Beijing, you make your profits here in Washington by going to 
this board and getting an award. Comment, please?
    Mr. Harrell. Thank you very much, and I realize I have just 
a couple of seconds. First, Congressman, I think you have 
started in exactly the right place, that we need to be putting 
pressure on companies to better understand their own China 
risks. Some are doing that, but not all of them, and more of 
them need to step up and do it.
    And then second, I do think we need to give our allies and 
partners a solution to these growing instances of Chinese 
economic coercion. We are seeing it is the American companies, 
Canadian companies, European companies, Asia, all over the 
world. I think that has to include a threat of retaliation on 
China if they keep doing that, as well as some ways to help 
impacted companies dodge or sort of compensate for what they 
are losing.
    Chairman McHenry. The gentleman's time has expired. We will 
now go to Mr. Posey of Florida for 5 minutes.
    Mr. Posey. Thank you, Mr. Chairman, for holding this 
hearing on the economic challenges with China. I assume we all 
agree that clearly, through economic dominance, China hopes to 
achieve military superiority.
    Mr. Ashooh, how much of the U.S. debt is owned by China?
    Mr. Ashooh. I don't know the recent number. I do know it is 
a substantial amount, and it is one that we should be taking 
steps on.
    Mr. Posey. Does anybody on the panel know?
    [No response.]
    Mr. Posey. Okay. So I would assume we wouldn't know how 
much is China debt. Let's try land ownership. Does anyone know 
the amount of land ownership in the United States held by China 
or Chinese companies?
    [No response.]
    Mr. Posey. Do we own any land or control companies that we 
wholly own in China?
    [No response.]
    Mr. Posey. Okay. Mr. Willems, when running for President, 
Mr. Biden famously said, ``They are not bad folks. Guess what? 
They are not competition for us.'' What are the most important 
ways that China is competition for us?
    Mr. Willems. I think it is across-the-board. China wants to 
remake the international order to its advantage and to our 
detriment, and if you look at what they are doing from a 
national security standpoint, that is a threat, and if you look 
at what they are doing from an economic standpoint, that is a 
threat as well. And so, I think they are all major threats to 
U.S. leadership and that we need to address them all 
comprehensively.
    Mr. Posey. Thank you.
    Mr. Feddo, in your experience with CFIUS_I had a crazy 
experience with them not too long ago when a foreign country 
was contracting with a local port to arrange a long-term lease 
agreement, and this port is the second-busiest cruise capital 
in the world. It is beside a nuclear submarine base, and it is 
adjacent to the Cape Kennedy missile range. There were some 
concerns by some citizens that the company who was pursuing the 
lease was from a country not friendly to the United States, and 
some principals in the company had ties to individuals who were 
not looked upon favorably by the United States.
    I told them not to worry, CFIUS will check them out, and 
make sure everything was okay. I contacted CFIUS to make sure I 
wasn't telling a story, and CFIUS said, ``What are you talking 
about? You know we don't check them out.'' And I noticed, in 
your written testimony, it is important for them to especially 
check out companies near sensitive government facilities or 
ports. And so, I asked CFIUS, ``Who checked him out?'' And the 
response was, ``I don't know. Why don't you ask DOD or the Navy 
or the Coast Guard who has the base?'' We ran the traps, and we 
never could clearly ascertain that anyone did check them out. 
What would be your suggestion going forward to appeal their 
decision not to look at that issue?
    Mr. Feddo. Congressman, thank you for the question. Without 
thinking through the facts a little bit more, it is hard to 
say. The way FIRRMA was drafted, a lease, or a concession, or a 
land purchase near a military installation that is designated 
expressly in a list published in the regulations is within the 
scope of CFIUS jurisdiction, and specifically with respect to 
ports. Then, there is a question of who would, within the nine 
voting member agencies, have the lead, the subject matter 
expertise to look at that more closely and consider_
    Mr. Posey. I only have 2 seconds left, and I wanted to ask 
you about_
    Chairman McHenry. The gentleman's time has expired.
    Mr. Posey. _Chinese purchases near military bases. Thank 
you.
    Chairman McHenry. We will submit that for the record.
    The Chair now recognizes the gentleman from New York, Mr. 
Meeks, who is also the former chairman and current ranking 
member of the House Foreign Affairs Committee.
    Mr. Meeks. Thank you, Mr. Chairman. Let me start with Mr. 
Harrell. You have commented on the ongoing debate here in 
Congress in regard to our national debt limit. What I want to 
ask you is, if Congress does not move to raise the debt limit, 
what impact would that have specifically on our global position 
relative to China?
    Mr. Harrell. Thank you, Congressman. I think it would have 
at least three. First, it would clearly harm our own economic 
potential and weaken our economic growth this year, in a year 
when China will probably have reasonably strong economic growth 
as they come out of COVID.
    Second, it is going to undermine the confidence of our 
allies and partners. Our allies are going to say to us, how can 
we count on the United States to defend our security if you 
can't even guarantee you are going to pay your bills?
    And third, it is going to undermine our economy over the 
long term as international investors and others look at whether 
they really think they have the security here in the United 
States that they want as they make investments internationally.
    Mr. Meeks. Thank you. Now, I absolutely recognize the 
threat that China poses to the United States from an economic 
and a national security lens. For us to combat these threats, I 
believe we need to focus on how we compete with China. I 
believe in the United States. We are the greatest country this 
planet has ever seen and we have the innovative capacity to 
challenge China across various sectors, from financial services 
and fintech to medical technologies, but we will lose that 
advantage if we are not vigilant. For example, as we look at 
our technological and economic position, I am particularly 
concerned with the speed in which China is developing its 
central bank digital currency (CBDC) and how that could impact 
the future of the U.S. dollar and the security of our global 
financial system.
    So let me ask you again, Mr. Harrell, can you identify 
those sectors in which the United States does have the 
competitive advantage over China, and in what ways can we 
continue to strengthen that?
    Mr. Harrell. Congressman, I agree with you 100 percent that 
the core foundation of our strategy to compete with China is to 
continue to promote our own leadership. That is why it is so 
important that Congress enacted things like the CHIPS Act in 
order to restore our leadership in semiconductor manufacturing 
as well as R&D. And I think that this Congress should look at 
continued investments in critical technologies, whether it is 
semiconductors, or quantum, or the clean energy economy, or 
biosciences.
    Also, looking at investments in maintaining our leadership 
in areas like financial services. I think it is important that 
the Treasury Department have an actual plan and agenda to 
defend the role of the dollar in international finance and to 
defend the role of U.S. financial institutions and the kind of 
stable role they play in maintaining international finance at a 
time when China is aggressively trying to push out the Chinese 
RMB and the Chinese Central Bank digital currency as mechanisms 
of payment and investments internationally.
    Mr. Meeks. Let me also then follow that up, because in 
competition, I believe you have to have a level playing field, 
and I think that a central part of our strategy with China 
should include the mechanisms to hold them accountable when 
they are not playing by the rules. So what should the United 
States do, along with our global partners, to make sure that 
China is playing by the same rules?
    I often worry that we sometimes let China off the hook by 
isolating ourselves because there are too many places where we 
are not present. China is present, we are not there, and, 
thereby, we end up isolating ourselves. I know when we have 
some controversial policies, whether in gun trade and other 
things here, so that if we are not there, China then goes, and 
they work with other countries to get things done. And they are 
trading, and we are left by ourselves, and we are isolating 
ourselves. So what strategy do you think that we should 
utilize? And if there is time, I would also ask the same 
question to Mr. Willems.
    Mr. Harrell. I think we need to be out in front building 
alliances with our economic partners. I think there are a 
couple of things we should be pursuing, starting with the Indo-
Pacific Economic Framework in Asia, and with the Americas 
Partnership for Economic Prosperity here in the Americas. I 
also think we should be looking at a critical minerals 
agreement to help ensure a clean minerals supply chain. Maybe I 
will leave it there and give Mr. Willems a couple of seconds.
    Mr. Willems. Thank you. I agree with very much of what you 
said. We need to be in the game, and I know Mr. Harrell has 
endorsed the Indo-Pacific Economic Framework, but I think we 
need to go further. I think we need to look at whether we can 
renegotiate the Trans-Pacific Partnership (TPP), whether we can 
make it work for U.S. interests. I think we need to do a trade 
agreement with Taiwan that will help Taiwan reduce its 
dependency on China. That is the way that we will provide a 
meaningful alternative, and I hope we can work on those issues 
together.
    Chairman McHenry. I thank the gentleman. We will now go to 
the Chair of our Subcommittee on National Security, Illicit 
Finance, and International Financial Institutions, the 
gentleman from Missouri, Mr. Luetkemeyer, for 5 minutes.
    Mr. Luetkemeyer. Thank you, Mr. Chairman. The chairman 
started out the discussion today talking about the threat to 
our global standing, both militarily and economically, by 
China, and I thoroughly agree with that statement. I think if 
we look at what we are doing, and I think this is what this 
committee hearing is about today, and how much funding we are 
doing to the Chinese government to be able to compete with us 
on those fronts, whether it is militarily, whether it is 
economically, whether it is with regards to oppressing their 
own people. Our argument here today is not with the Chinese 
people. It is with the Chinese Communist Party, who has slashed 
their government. And I think you can see, we have bipartisan 
support today for this kind of argument about going after the 
Chinese government and trying to get a level playing field for 
our manufacturers and to protect us in the future.
    So along that line, we need to be able to, I think, cut off 
this financing. How do we do it? We are open to all your ideas. 
One of the things that we have done is, in 2020, Congress 
passed the Holding Foreign Companies Accountable Act, to 
require foreign companies that wish to be included on the U.S. 
Stock Exchange to open up their books and ensure that they are 
properly audited.
    And basically what has happened is in 2020, there were 
1,000 Chinese companies on our stock exchange, and as of 
January the 9th, it is down to 252. They are required to have 
an audit every 2 years. Many of our United States companies 
have to be audited every year. Would you go along with 
increasing that, or, I guess, increasing it to an annual audit 
on the Chinese companies like you do ours, or is there a reason 
that we should keep it at 2 years? Who wants to take the 
question?
    Mr. Willems. Let me first say, thank you for Congress' 
leadership on the Holding Foreign Companies Accountable Act, as 
well as the Accelerating Holding Foreign Companies Accountable 
Act. There is no question that China would not have opened up 
its books and records had Congress not acted, and that was 
really important to make sure that they are playing by the same 
rules and that we protect the sanctity of our markets. Now, I 
do think we need to be vigilant in making sure that we are 
reviewing them on an annual basis, and my understanding is that 
is how the law will be implemented. And it is really important 
to make sure that the access they provided in December was not 
just a one-time act to prevent mass de-listings, but that we 
hold them to account.
    Mr. Luetkemeyer. Over a 2-year period, you can play a lot 
of games, so I think it is important that we go to an annual 
audit, and I appreciate your comments. The Chinese government 
has also gotten into the digital currency business, and I have 
a bill to prevent money services businesses from conducting 
transactions in digital yuan. I don't know if any of you looked 
at the bill or you have any concerns at all about American 
businesses, American individuals investing in it or being able 
to do business in that. Do you have any comments on it? Nobody? 
Yes?
    Mr. Lorber. Sure, I have a take. I think the general 
concern with the digital yuan, digital renminbi, in particular, 
is related to transparency, and the question about what type of 
data or information the Chinese could have access to given 
widespread implementation and usage of the digital renminbi. 
So, I think legislation_and I apologize, I have not reviewed 
that bill.
    Mr. Luetkemeyer. I am going to leave it to my good friend, 
Mr. Hill, who is the Chair of our Digital Assets, Financial 
Technology and Inclusion Subcommittee, but it would seem to me 
that the Chinese use it to be able to control and monitor their 
people. And why would we want to allow our people to be in that 
same predicament? This is one of my concerns.
    I know that a couple of my predecessors here on the dais 
asked questions with regards to what we should do, what your 
actions should be. How should we control China with regards to 
an invasion of Taiwan? And I think we need to be looking at 
this very quickly, and very thoroughly, because over the 
weekend, I guess about a week ago now, the leading general for 
the Air Force indicated that he thought that China was going to 
invade Taiwan by 2025. If that is the case, how should we 
react?
    I think, Mr. Willems, you made a comment a while ago with 
regards to that. I asked the question when the Fed and Treasury 
were here, are you thinking now in terms of what is going to 
happen, how we should be sanctioning China when that happens, 
when they invade Taiwan, and it was like a deer-in-the-
headlights look. They had no idea what we are doing, which is 
really concerning, knowing that this is inevitable.
    Mr. Willems, would you like to go back over that a little 
bit? What would be some things that you think we should do? And 
I think we need to stress that if they are going to invade 
Taiwan, and we are going to play footsies with everybody 
because, well, we don't want to upset the applecart with our 
allies, and we don't want to hurt the Chinese government, the 
Chinese are going to take us over. They are weaponizing the 
economy against us today. At some point, we have to cut bait 
and say, you know what? You are bad people. We have to stop 
playing games with you. What would you say?
    Mr. Willems. I have three suggestions on Taiwan. The first 
is, as you articulated, we need to be thinking now about what a 
sanctions package should look like. We need to be working with 
allies to make sure that they will have resolved that as well, 
and I hope that that is already happening at the NSC. The 
second thing is, as you mentioned, I do think we need to look 
at helping Taiwan militarily, making sure that they have those 
tools. And then third, I also think we need to be helping them 
economically, and one of the things that I would advocate for 
is a free trade agreement with Taiwan. Right now, 50 percent of 
Taiwan's trade is with China, and that gives China a tool to 
coerce them economically by cutting that down and shifting that 
around. And we can't let them be vulnerable in that way.
    Chairman McHenry. The gentleman's time has expired. We will 
now go to the gentleman from Georgia, Mr. Scott, who is also 
the former chairman and current ranking member of the House 
Agriculture Committee, for 5 minutes.
    Mr. Scott. Thank you, Mr. Chairman. Mr. Harrell, I am 
deeply concerned with the fast-growing possibility of a China-
led world order. That includes the Chinese military controlling 
the South Pacific trade routes because the South Pacific trade 
route is now the lifeline of the entire global economy. And 
that is why I was concerned, deeply concerned about this 
balloon business, and why the President allowed this balloon to 
go all over our country and not blow it down. So all I am 
saying is that with this technology, with this military 
information going deep into the abilities of our national 
defense system, our national security of the number-one nation, 
economy, and military in the world, sends a powerful message, 
not only to our enemies, but to our partners in this nation. 
What gives with this?
    And also, under what circumstances do you see the Indo-
Pacific nations accepting an economic and military order in 
which China sets trade and investment rules for that region, 
particularly if they are seen to be applying agenda-setting 
dominance over any new technology, the availability of new data 
and standards? This is why they sent that balloon, to get an 
assessment of the technology, of the information, of the data, 
and this is why I want you to answer this question for me, how 
do you see this? And do you not see my point? I love the 
President, I support him, but this move not to blow down their 
balloon sends a powerful message to both our enemies and our 
friends, because it is all about data. It is all about 
intelligence. It is all about knowledge, and they got us on 
this one. What do you say about that?
    Mr. Harrell. Thank you very much, Congressman, for the 
question. I should begin by saying, I am not a military expert; 
I am an economic expert. So, I am going to have to defer to the 
Department of Defense for their decision to wait to shoot down 
the balloon and take at their word their reasons for waiting. I 
agree with you very much, Congressman, that we need a very firm 
and very resolute response to what China did. And I think that 
we should view Secretary Blinken's decision to postpone his 
trip to China and the decision to shoot down the balloon off 
the coast of South Carolina as the start of a response, not the 
end of a response. And I think we should be looking at other 
tools, whether it is sanctions on the Chinese companies 
involved in the balloon, whether it is looking at ways to 
increase our military and sort of surveillance presence in the 
Indo-Pacific to see future balloons coming in, and other tools, 
but recognize that we need to continue to show a resolute 
response.
    On your question about countries in the Indo-Pacific and 
are they going to come into China's orbit, they will if we are 
not there. That is why I think it is so important that we be 
out in the Indo-Pacific economically, that we be out there 
diplomatically, that we be looking to build our technological 
ties with key countries in the region, and that we continue to 
shore up our defense relationships with key countries across 
the region, because if we are not there, that is when they are 
going to be turning to China.
    Mr. Scott. And I agree with you 100 percent. Thank you.
    Chairman McHenry. The gentleman's time has expired. We will 
now go to Mr. Huizenga of Michigan, who is also the Chair of 
our Oversight and Investigations Subcommittee, for 5 minutes.
    Mr. Huizenga. Thank you, Mr. Chairman. I actually jump off 
on that point. I am not sure I agree that the strongest 
response that the U.S. could have had to the balloon incident_
let's call it that_was to not go to Beijing. It might have been 
an even stronger response to get there and confront the Chinese 
on their own territory about what has been happening here. And 
there are a lot of details that are emerging and coming out.
    Here is what I do know, and I hope everyone is hearing this 
on more or less a bipartisan basis, but whether it is CFIUS, 
FIRRMA, the Export Control Reform Act, the Holding Foreign 
Companies Accountable Act_there has been a fair amount of work 
that has been done. I have been very critical, frankly, of the 
Public Company Accounting Oversight Board (PCAOB). And it is 
agreements with Beijing that allow U.S. investors to scrutinize 
really a small subset of audit firms and even a smaller 
sampling of the transactions and audits. What I am concerned 
about is whether China can ever provide an actual safe, stable 
business climate for U.S. investors. And I am curious, quickly, 
if you can comment, and we will go right down the row here, how 
can and should our regulators ensure investors have some 
modicum of protection of what they are investing in? Mr. 
Ashooh?
    Mr. Ashooh. Yes, it starts with information. I think, as a 
former regulator, we took_
    Mr. Huizenga. Transparency.
    Mr. Ashooh. Yes, transparency, but really I consider it 
direct communication.
    Mr. Huizenga. Okay.
    Mr. Ashooh. I think the government has a responsibility to 
share with affected industries what it can about the particular 
environment, in this case, China.
    Mr. Huizenga. Okay.
    Mr. Ashooh. And gathering that information in the first 
place is also quite critical.
    Mr. Huizenga. Great. Mr. Feddo?
    Mr. Feddo. I completely agree with Mr. Ashooh. The 
transparency is paramount.
    Mr. Huizenga. Okay. Mr. Lorber?
    Mr. Lorber. Thank you, sir. I can't speak to the specific 
issue, but transparency as a general matter, both for investor 
protection and for financial crimes, is incredibly important.
    Mr. Huizenga. Okay. Mr. Willems, do you have anything to 
add?
    Mr. Willems. It sounds good to me.
    Mr. Huizenga. Mr. Harrell?
    Mr. Harrell. I will join my colleagues on transparency.
    Mr. Huizenga. Okay. The PCAOB has been tasked with 
negotiating this out. I am not sure that we have really seen it 
be as tough as it is because it seems like it is being 
controlled more by Beijing, and many others have been critical 
of Russian companies that were listed on the U.S. exchanges as 
well. And how long are we going to let the PCAOB take this same 
posture with the Chinese government before we take a more 
strong, robust posture with China as we have tried to do with 
Russia And some others?
    Mr. Willems, the IMF Reform Act and Integrity Act, which I 
have introduced in the last two consecutive Congresses, would 
place greater restrictions on major shareholders of the fund, 
notably China and Russia. Specifically, the legislation would 
ensure that any quota increases by the IMF would be done with 
consideration as to whether a country is following certain 
principles of the fund, most notably currency manipulation. The 
bill is complementary to my colleague, Mr. Hill's, Special 
Drawing Rights Oversight Act, which again draws attention to 
Russia's lack of adherence to international lending standards.
    Mr. Willems, you noted in your testimony that, ``The United 
States should seek to change the way China does business,'' and 
the need for it to be, ``a responsible international 
stakeholder.'' Can you help the committee understand how 
important it is for the IMF to hold China and other major 
shareholders responsible for their actions?
    Mr. Willems. Let me just say that I think your legislation 
makes a lot of sense, and, in particular, this concept that we 
need to create standards within these institutions that hold 
China to account. I think it is difficult for us, whether it is 
the World Bank or the IMF, to come in and simply say we want 
China to do this or we want China to do that. That can make it, 
I think, sometimes difficult to gain broader support for it. 
But if we create a standard that we know China can't meet and 
use that as an objective standard, I think that can be more 
effective within those institutions.
    Mr. Huizenga. Okay. U.S. companies often face a 
considerable disadvantage to their Chinese counterparts, which 
often receive large state subsidies and those kinds of things, 
So I am curious, what is the most effective tool, in your 
opinion, that we in Congress can wield to level that playing 
field without harming or impacting open and fair domestic 
markets as well?
    Mr. Willems. On the subsidies question, there are a couple 
of things we can do, and I see I only have about 3 seconds, but 
quickly, I would say defense and offense. On the defense side, 
where there are Chinese subsidies, we have trade tools to 
countervail that. On the offensive side, we need to provide 
alternatives.
    Mr. Huizenga. And maybe it would be helpful, Mr. Chairman, 
if we could get a response back in writing.
    Chairman McHenry. The gentleman's time has expired. We can 
take a written response.
    The Chair now recognizes the gentleman from Massachusetts, 
Mr. Lynch, who is also the ranking member of our Digital 
Assets, Financial Technology and Inclusion Subcommittee, for 5 
minutes.
    Mr. Lynch. Thank you, Mr. Chairman, and I want to thank 
Ranking Member Waters as well for her work in putting this 
hearing together.
    Members on both sides of the aisle have been keenly 
interested in the development of a retail central bank digital 
currency. And China's domestic retail Central Bank Digital 
Currency Pilot, known as the e-CNY, or the digital yuan, has 
received a lot of focus from Congress recently as a challenge 
to the primacy of the United States' dollar and also as a full 
spectrum surveillance tool for the Chinese government. However, 
usage of the digital yuan has so far remained very low as 
consumers seem to be sticking with private payments ecosystems, 
including Alipay and WeChat Pay. There has been little focus, 
however, on mBridge, which is the cross-border bank-to-bank 
wholesale CBDC pilot that is being conducted by four countries, 
including China,_which is the lead, I guess_Hong Kong, 
Thailand, and one of the countries in the Middle East. I am 
blanking on it right now, but there are seven more countries 
that have received offers to join. And mBridge, as you know, 
operates outside of SWIFT and the existent correspondent 
banking system, and could be a tool for sanctions evasion and 
other financial crimes.
    Mr. Harrell, how concerned should we be in Congress about 
China's Central Bank Digital Currency Pilot Project and why?
    Mr. Harrell. Thank you, Congressman, for the question. I 
agree with you that it has been interesting to see how little 
interest there is in the domestic uptake in China of the e-CNY. 
Now, Chinese consumers, probably because they don't actually 
want the Chinese Central Bank seeing everything they buy, are 
trying to stay outside of the e-CNY. We obviously have a 
limited ability to affect the domestic deployment of a digital 
RMB in China.
    I think you are right to focus on the cross-border 
payments. I don't think that China and RMB-denominated payment 
rails displacing the dollar is going to be a challenge in the 
next 6 to 12 months, but I do think it is a mid-term challenge. 
We have seen Russia, with the Mir payment system, try to create 
rails outside of Russia, as we have put sanctions on Russia. 
And you see China trying to do exactly the same thing with its 
cross-border payment strategy.
    I think it is essential that we as the U.S. Government and 
this committee, with jurisdiction on this issue, promote a 
strategy to maintain the preeminence of the U.S. dollar as the 
primary currency for reserve purposes and for international 
payments. And I think that is going to require us to both be 
competitive on our end, what can we do to make the dollar 
attractive, and it is going to require us to throw some sand in 
the gears of efforts by China and other countries like Russia 
to try to build out these alternative payment rails.
    Mr. Lynch. I appreciate your response, but when we think of 
this as a global problem, the idea that we could ally with 
other countries that have the integrity of the SWIFT system and 
operate within that system, how could we partner with them? 
What could we do here to strengthen the SWIFT system? If not, I 
don't know if we could get buy-in from many of our allies to 
increase the strength of the U.S. dollar. But I do think we 
could get buy-in to increase the integrity and the affinity for 
operating within the SWIFT system, which would push back on 
this attempt by the Chinese and the Russians to adopt a 
different set of rails. What could we do to encourage or 
strengthen the SWIFT system?
    Mr. Harrell. I will make two comments: one on the SWIFT 
system; and one outside of or parallel to the SWIFT system. 
First, the Federal Reserve has an active program underway to 
try to speed up U.S. dollar payments that are currently going 
through the existing Federal Reserve's organized payment rails. 
And I think that is really important, because payments 
internationally can be slow, and we need to make sure that they 
are working faster so that people want to continue to use the 
existing system, so I think what the Fed is doing is important. 
And then, also putting friendly pressure on SWIFT, and on the 
banks, and our correspondent sort of relationships to make sure 
payments are sped up there, too, is another important area of 
work.
    Mr. Lynch. Thank you, Mr. Chairman. I yield back.
    Chairman McHenry. The gentleman's time has expired. I now 
recognize the Vice Chair of the committee, Mr. Hill of 
Arkansas, for 5 minutes.
    Mr. Hill. Thank you, Chairman McHenry, and what a pleasure 
it is to say those words, ``Chairman McHenry.'' The Members 
have been a part of your leadership team for many years, and we 
are ready to work on the committee's agenda and deliver on our 
commitment to America.
    As we go into today's hearing, we should all remember the 
basic things that we take for granted here. The Chinese 
Communist Party maintains a surveillance state with a great 
firewall and no freedom of speech, no freely-exchangeable 
currency and no rule of law. But they can never compete with a 
free and open society that allows for free enterprise and 
prosperity like in the United States where we encourage 
innovation, entrepreneurship, small businesses, and a thriving 
marketplace of ideas. It is the same reason America was able to 
develop the internet as well as the deepest and most-liquid 
capital markets in the world. China tries to replicate that. It 
is tough, but they are working to catch up, and it is through 
that lens that I hope we can work in a bipartisan way in this 
Congress to create a framework for digital assets that allows 
for innovation, provides for clarity, and protects investors in 
a way that they can understand.
    Mr. Chairman, America cannot win this strategic competition 
with China by trying to be more like China and being focused on 
passing more industrial policy measures. We have to protect 
American workers and businesses by fighting for a level playing 
field, while standing up for our values of freedom and free 
enterprise, both here and abroad. That includes doing the hard 
work of oversight on the multilateral organizations in our 
jurisdiction, like the International Monetary Fund and the 
World Bank. I thank Chair McHenry for noticing several of my 
legislative initiatives that advance U.S. strategic interest at 
these international financial institutions, securing America's 
medical supply chain, deterring war in the Taiwan Strait, and 
protecting the dollar's position as the global reserve 
currency.
    Mr. Willems, I was glad to hear your testimony about the 
multilateral coordination and how that is critical to ensure 
that U.S. measures on China are effective, and that we should 
be active at the World Bank and the IMF to pressure China to 
act like the responsible international stakeholder that they 
claim to be. I couldn't agree with you more, especially as 
China continues to refuse consistently to provide debt relief 
to developing countries it has saddled with loans that they 
can't pay back. Beijing blatantly ignores international lending 
rules, like the Paris Club, and yet, in my view, the Biden 
Treasury has not been strong enough.
    Your written testimony mentions that G20 has been less 
effective and that we need to be realistic about how much we 
can achieve in that forum. In my view, using the G20 is a 
feeble place to try to achieve anything significant. So let me 
ask you, very few countries have taken the G20 up on this debt 
restructuring framework that Treasury Secretary Yellen co-
authored last year, and very few non-Paris Club creditors like 
China are remotely in compliance. What can we do in the 
international fora by the U.S. to pressure China to restructure 
their predatory loans and fully participate in the Paris Club?
    Mr. Willems. Thank you for a very good question, and let me 
just first say, I agree with almost everything you said. You 
made a lot of great comments about how we shouldn't become 
China to beat China. We need to double down on our strengths. 
Now, with respect to the international institutions, you hit 
the nail on the head. China made a commitment at the G20 that 
it is not following through on, and we have had challenges in 
enforcing that. I think some of the legislation that you have 
discussed here can help at the IMF. I think we need to look at 
a broader package of reforms that calls out specific behaviors, 
and I am not sure how you can put an enforcement mechanism into 
the IMF.
    Mr. Hill. That is the challenge.
    Mr. Willems. It really has to be collectively. We work with 
allies maybe through the G7 to coordinate approach. We call 
them out. We embarrass them politically, internationally.
    Mr. Hill. Thank you. I agree with you, and I think you have 
hit the nail on the head. We need to be working where we have 
influence and shareholder votes at the Board of the World Bank, 
at the IMF, and through the G7, and not off in the talk fest at 
the G20.
    Let me turn to Mr. Lorber. Mr. Lorber, this Congress, I 
will be serving on the Intelligence Committee. I look forward 
to working with my good friend from Connecticut, Jim Himes, 
also a member of this committee, to serve as the ranking member 
of Intel. You were at the Treasury. Can you help me understand 
where the gaps, from your point of view, are on economic 
intelligence and data gathering related to China and China's 
economic success and failure, transparency on the data that we 
get about China?
    Mr. Lorber. Thanks. It is a great question, and I realize I 
only have a few seconds.
    Mr. Hill. You can submit your answer in writing.
    Mr. Lorber. Okay. Thank you.
    Mr. Hill. And, Mr. Chairman, before I yield back, may I ask 
unanimous consent to enter in the record an opinion piece I 
wrote in The Hill in 2021 entitled, ``Build back nuclear.''
    Chairman McHenry. Without objection, it is so ordered.
    And thank you for working with me on that nuclear bill, and 
continuing to work with me on that nuclear bill.
    With that, I now recognize the gentleman from Texas, Mr. 
Green, who is also the ranking member of our Oversight and 
Investigations Subcommittee, for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman. I thank the ranking 
member as well, and I would like to pose a question related to 
a bill emanating from the Texas Senate, SB 147. This bill has 
language in it that indicates the following may not purchase or 
otherwise acquire title to real property in this state, and it 
goes on to set out individuals who cannot purchase or acquire 
real property. A person who is a citizen of China is listed, as 
well as Iran, North Korea, and Russia. This has caused a good 
deal of consternation among many of my constituents. I think 
that it is difficult for some people who are not of color or 
from a minority, occupy minority status, to understand how 
legislation as well as language can impact what they perceive 
as their safety. People are legitimately concerned, in my 
opinion, about their safety because of this legislation, which 
singles out persons from China. The bill doesn't make an 
exception for a green card holder, although the person who has 
crafted this now says that such an exception will be available. 
This legislation doesn't mention the sensitive sites or 
critical infrastructure, just says if you are a citizen of 
China, you can't buy property.
    Let me start with Mr. Harrell. Sir, do you understand how 
this can, first, impact people in the social setting, and then, 
I would like your comments about the Pandora's box we may be 
opening if we allow every State to decide that it will make 
rules or promulgate laws that will impact the purchase of 
property based upon citizenship of persons.
    Mr. Harrell. Thank you very much, Congressman, for both of 
those questions. I should begin by saying I think it is 
essential that as we compete with China and with the Chinese 
government, we as Americans never slide down the road of 
discriminating against people based on their race or their 
ethnic or national origin. I think we want to make clear that 
we continue to welcome talented Chinese engineers and talented 
Chinese people of all backgrounds to come to the U.S. to set up 
businesses and take advantage of the opportunities here, and we 
should not be discriminating against people based on their 
national origin.
    I think there are legitimate concerns around certain 
purchases of real estate by companies and certain individuals 
connected to China. That is why, in 2018, CFIUS got 
jurisdiction to review purchases of land or leases of land near 
sensitive military sites. If there are ways in which that 
statute is inadequate, if there are other kinds of sites or 
infrastructure where we are concerned about or the defense and 
intelligence community are concerned about espionage risks, 
this committee should look at CFIUS and see if CFIUS needs a 
little bit more jurisdiction over other kinds of real estate 
purchases.
    I don't think we want to see a patchwork of State laws 
prohibiting ownership of property based on national origin. 
That is just not the right way to tackle this kind of a 
problem. This is a Federal problem, and it also comes off as 
hostile to the many legitimate, sort of perfectly fair kinds of 
purchases that are out there.
    Mr. Green. Thank you so much. Let me quickly move on, 
because I have 39 seconds left. If you believe that we 
absolutely must raise the debt ceiling, would you kindly extend 
a hand into the air? Only one person believes that we must 
raise the debt ceiling? Now, three. Okay.
    Chairman McHenry. Are you asking the committee as well?
    Mr. Green. I am going to make an exception for the Chair.
    Chairman McHenry. Thank you.
    Mr. Green. Would you give me 10 seconds now? Raise your 
hands again, please. I am going to have a picture of this in my 
office. So, everybody believes we should. Okay. We should raise 
it. We must. It is easy. Okay. Do you believe that we must cut 
the budget to raise it?
    Chairman McHenry. The gentleman's time has expired.
    Mr. Green. Mr. Chairman, can I get my 10 seconds that you 
borrowed from me for that answer please?
    Chairman McHenry. Without objection, I give the gentleman 
an additional 7 seconds that I took from him.
    Mr. Green. Okay. Thank you. Would you raise your hand if 
you think we must cut the budget to raise it? Three. Thank you. 
I will make sure that we properly photograph you. Thank you. I 
yield back.
    Chairman McHenry. We will reset the time. I don't want to 
take anyone else's time. I thank the experts on China for your 
opinions about domestic American politics and for complying 
with the oddness of hand-raising in a congressional format. 
From time to time, we all do it. It happens.
    The Chair now recognizes the gentlewoman from Missouri, 
Mrs. Wagner, who is also the Chair of our Capital Markets 
Subcommittee.
    Mrs. Wagner. Thank you, Chairman McHenry, for organizing 
this, I think, critical and very timely hearing, and I want to 
thank our witnesses today for their expertise, and we will have 
no raising of hands in my questioning.
    I spent the weekend tracking the progress of the Chinese 
spy balloon as it flew unimpeded over the U.S. sky, surveilling 
sensitive military sites, including my own Whiteman Air Force 
Base, and civilian centers across the country, including all 
across the second congressional district of Missouri. My 
children and I, along with countless families across St. Louis, 
watched in real time from our porches, our backyard, outside of 
our businesses, as a foreign aircraft, equipped with spyware, 
navigated over our neighborhoods, again, our infrastructure, 
our nuclear plants in Callaway, our military bases, and such. 
China's decision to send a spy balloon into U.S. airspace was a 
profound and deliberate provocation. It should have been met 
with strength from the get-go and shot down before it even 
entered our skies or U.S. airspace. President Biden's decision 
to let the CCP spy balloon transit the length and breadth of 
the United States of America was an unpardonable show of 
weakness on the world stage. As Vice Chair of the House 
Committee on Foreign Affairs, I am calling on the 
Administration to restore America's ability to deter these 
reckless provocations.
    The stakes of strategic competition with China are 
exceedingly high, and if the CCP's influence continues to 
spread and grow unchallenged, American communities will pay the 
price. The world will be less open, less prosperous, less fair, 
and much more insecure. We cannot allow the U.S.-led world to 
remain vulnerable to the whims of communist dictators, and the 
dictatorship in Beijing. That is why I have championed 
legislation to hold China accountable at all levels of 
engagement.
    My bill, the Compensation for Americans Act, would insulate 
America's vulnerable supply chains from overreliance on China, 
allow U.S. companies that have been attacked by Chinese hackers 
to strike back, and prevent China from manipulating developing 
country designations to obtain preferential treatment in 
international organizations. And importantly, it would also 
tighten U.S. export controls to choke off the CCP's ability to 
disseminate propaganda and further develop its surveillance 
capabilities. I believe we have a duty to stand up to the 
nations that refuse to play by the rules, and when we 
demonstrate strength and resolve in the face of China's 
bullying and brinkmanship, we make the world a safer and more 
prosperous place.
    Mr. Ashooh, the export control system is a powerful tool 
that restricts the resources available to our enemies. However, 
implementation is extremely challenging, especially considering 
that China cannot be trusted to adhere to licensing agreements. 
What are the major gaps in the U.S. export control system? And 
how should the United States approach especially the dual use 
exports?
    Mr. Ashooh. Thank you, Congresswoman. I actually mentioned 
in my opening comments that we need a different approach when 
it comes to things like complex supply chains because there are 
methods for multilateral control that exist right now, but I 
don't believe they are adequate. I believe that for export 
controls to work, anything done unilaterally out of the gate 
probably is going to be limited in its effectiveness. And you 
need to work with allied nations, especially those that have 
similar capabilities to deliver similar technology.
    Mrs. Wagner. I appreciate your perspective, and I agree. 
Mr. Ashooh, the Bureau of Industry and Security (BIS) waited 
until after Russia attacked before applying strict export 
controls on its military end users. Yet, the buildup of Russian 
forces on the Ukrainian border, which no doubt poses a 
significant threat to the U.S. interests, certainly met BIS' 
criteria for aggressive controls. Clearly, waiting until after 
the invasion to apply export controls neither prevented nor 
deterred Russian aggression in Ukraine. What were the failures 
of BIS strategy in the run-up to the invasion of Ukraine, and 
how should the U.S. incorporate lessons learned to deter 
aggression against, for example, Taiwan?
    Mr. Ashooh. I might say BIS is responsible for the dual-use 
export controls, which, by their nature, contain a lot of 
commercial technology. I am not exactly sure where BIS was 
failing in restricting dual-use controls in the lead-up. The 
military_there should have been zero to nothing in terms of 
military shipments. So, I would like to know more about the 
question you are asking because that would be a very sobering_
    Chairman McHenry. The gentlewoman's time has expired.
    Mrs. Wagner. My time has expired, and I yield back, Mr. 
Chairman.
    Mr. Hill. [presiding]. I thank the gentlewoman. Mr. Cleaver 
is now recognized for 5 minutes.
    Mr. Cleaver. Thank you, Mr. Chairman. I think this hearing 
is quite appropriate and extremely important.
    I am not going to talk about the balloon. In fact, I am 
going to wait until our intelligence community provides us with 
some data. We don't even know what is going on so far, but I am 
concerned about something when I was looking at what we are 
doing here. The world's two biggest economies, the United 
States and China_we are in a battle with a nation that is using 
the government of the nation to propel its development around 
the world, and, of course, we deal with the private sector.
    The trade relationship between the U.S. and China, as my 
little granddaughter says, is ginormous, and then we import 
more goods from China than we import from any other nation on 
the globe. There are some benefits: lower prices for consumers; 
and also some behemoth profits for the corporate sector. And my 
issue is, we have a schizophrenic relationship, don't we, with 
China? Any of you? Is, ``schizophrenia,'' a bad word in terms 
of describing the relationship?
    Mr. Harrell. We are obviously at a pivot point in our 
relationship to China where there is a growing, I think, strong 
bipartisan consensus that we need a different set of policies. 
Now, I think in certain ways, the trading relationship and some 
of the structures in the trading relationship is lagging behind 
the geopolitical realities we now face, and we could have a 
long discussion about how to better balance the trade and 
tariffs. Personally, I think what we need to move to at a 
conceptual level with China is a much more managed trading and 
investment relationship. They are heavily managed on their side 
of the economy. They have all kinds of distortive subsidies. 
They have all kinds of unfair IP theft and things like that, 
and we are just going to have to manage the trading 
relationship with them so that they don't undercut our economy 
and our prosperity with all the things they are doing over 
there in China.
    Mr. Cleaver. Mr. Lorber?
    Mr. Lorber. Yes, and if I could just add to that, I don't 
know if I would use the word, ``schizophrenic,'' but I do think 
we should have somewhat of a bifurcated approach, and that 
there are areas where clearly certain types of trade could pose 
a national security threat and we need to crack down on those. 
Where there are areas where China is clearly cheating, we need 
to deploy tools to counteract that. On the other hand, I think 
it is critical to realize that the Chinese market is really 
important for a lot of our companies, and that if we are going 
to be globally competitive, we want to be selling into China.
    And think about it this way: If we are selling a bunch of 
stuff to China, essentially Chinese consumers are subsidizing 
our continued innovation, and that is a good thing. So I think 
what we want to do is try to be bifurcated, as I described it, 
crack down where it is unfair or there is a national security 
concern, but try to open up China where it can benefit the 
United States.
    Mr. Cleaver. Yes, I wanted to move to the 1970 Bank Secrecy 
Act, and then you just raised another issue. I maybe want to go 
into that a little bit more. Well, I won't. Let me get to the 
Bank Secrecy Act. I think there are rules being formulated now, 
but I would like to find out from you, Mr. Lorber, the real 
estate industry, in my estimation, is vulnerable to money 
laundering because at this moment, they are not required to 
comply with this rather old but very important Bank Secrecy 
Act. Do you agree that real estate transactions ought to also 
be reported just as banks are required to report suspicious_oh, 
my goodness. Thank you, Mr. Chairman.
    Mr. Hill. The gentleman's time has expired. Mr. Barr from 
Kentucky is recognized for 5 minutes.
    Mr. Barr. Thank you. I thank Chairman McHenry for putting 
together this outstanding panel and I thank our witnesses for 
addressing what I believe to be the most consequential national 
security and economic security challenge of our generation, our 
strategic competition with the People's Republic of China and 
countering the threat from the CCP. I want to specifically 
compliment Mr. Feddo for his testimony that as we look at 
investment screening, outbound investment in this important 
dimension of our economic competition with the PRC, that this 
is an issue that Congress needs to deal with, and that creating 
an investment screening mechanism by Executive Order would be a 
major mistake.
    Now, I will compliment the Trump Administration for the 
Executive Order that banned U.S. investments in certain Chinese 
military-industrial companies, and I would also compliment the 
Biden Administration for expanding on that Executive Order with 
its own to expand it to surveillance companies, but this is an 
issue that Congress needs to set the parameters for and direct 
the Executive Branch to implement.
    And I would like the witnesses to comment on my legislation 
that seeks to do that, H.R. 760, the Chinese Military and 
Surveillance Company Sanctions Act, which would expand on those 
Executive Orders and extend the full weight of Treasury 
sanctions against these Chinese military-industrial complex and 
surveillance companies, while allowing U.S. investors to 
continue to invest in benign companies in emerging growth 
markets.
    Mr. Willems, let me start with you. Is this approach, my 
bill, is it a good way, is it the best way to ensure that 
capital flows don't fund the Chinese military-industrial 
complex? And when you answer that question, I want you to 
address the two gaps that you talked about in your prepared 
testimony. Does my bill get at those two gaps, specifically, 
the private equity and venture capital piece, and also 
international, the multilateral impact, the other international 
non-U.S. investors?
    Mr. Willems. Thank you, Congressman, and I think you are 
absolutely right that we need to have a statutory basis for 
these actions and that Congress should work on that in a very 
studied and thorough way. I also agree with you that we want to 
expand on the existing restrictions. And what I described in my 
testimony, and I believe your bill addresses it, but we can 
work on the technical aspects of it, is that first, the current 
Executive Order only applies to investment in public 
securities, and that should also be expanded to private 
investment. And second, the bill, or the current EO, only 
applies to a limited subset of sectors within China. There may 
be national security threats in other sectors, and we need to 
be able to look at those as well. So, I look forward to working 
with you on your legislation.
    Mr. Barr. Yes, I want to expand it also to technology-
related companies, dual-use technology, AI, and other things 
that implicate national security. And I agree, the Executive 
Orders don't address that. My bill though, Mr. Willems, would 
address using OFAC sanctions. It would address that private 
equity venture capital piece, right?
    Mr. Willems. That is my understanding.
    Mr. Barr. And then, Mr. Feddo, to your point about the 
Casey-Cornyn approach and the Committee on National Critical 
Capabilities similar to reverse CFIUS, I appreciated your point 
that creating a bureaucracy that ensnares a lot of benign 
outbound investment is maybe not the targeted approach we need. 
Can you expand on that testimony? And why would the OFAC 
approach, a simple clear message, signal to the private sector, 
green light, red light, be better than a bureaucratic approach 
such as this Committee on National Critical Capabilities?
    Mr. Feddo. In the first instance, it would be far more 
nimble, and with a committee, you have inefficiencies. I will 
just say, one of the deficiencies I see with a committee setup 
is you can't unring the bell once you do this. For example, I 
am a big fan of CFIUS, and I think it is a great tool when 
appropriately used and focused on national security, but it has 
been around for 50 years, okay? So if we create a new 
bureaucracy to screen outbound, it is going to be here. I do 
agree that the OFAC approach seems to me to be an approach that 
hasn't been adequately explored.
    Mr. Barr. Thank you.
    Mr. Feddo. And in a prohibition context, making these like 
SDNs, prohibits all dealings. So, private equity and venture 
capital would be in the mix.
    Mr. Barr. Thank you. And, Mr. Willems, in my remaining 
time, I appreciate your focus on pairing defensive actions with 
offensive actions to maintain U.S. economic strength. In 
response to Mr. Harrell's testimony about the debt limit, can 
you speak to the overspending in Washington and how that 
compromises the dominance of the dollar, and how we need to 
pair avoiding default with reform?
    Mr. Hill. The gentleman's time has expired.
    Mr. Willems. I will respond to that in writing.
    Mr. Barr. Thank you. I yield back.
    Mr. Hill. Thank you for responding in writing. We now turn 
to Mr. Foster for 5 minutes.
    Mr. Foster. Thank you, Mr. Chairman, and thank you to our 
witnesses. I would like to say that I am speaking as a 
manufacturer, as someone who started a company that has 
provided over a thousand jobs and kept those manufacturing jobs 
in the Midwest for decades. We have competed against cloned 
Chinese products, and we have become increasingly dependent on 
Chinese components of our supply chain, and that is the 
commercial reality.
    I would also like to echo Mr. Ashooh's comments that we 
should be thinking in terms of reducing, if not the defensive 
perimeter, at least the stronghold from the G20 to the G7. The 
free democracies of the world are the group of countries 
through which we should have absolutely free markets, as free 
as our politics allow. And then, the G20 will be a more 
contested area, but we have to make common cause with the G7. 
And I would also like to say it is not just the G7; when you 
say G7, please include Korea; Korea's economy is larger than 
Russia's. It is the Koreans, not the Taiwanese, who lead the 
world in leading-edge semiconductor production. Samsung, not 
TSMC, is in production at the three nanometer design node.
    So, what I would like to focus my questions on are really 
one of the demographic trends, and I am sure many of you, if 
not all of you, may remember the essay, ``The Japan That Can 
Say No.'' And I guess the subtitle was, ``Why Japan Will Be 
First Among Equals.'' It was published in 1989, and got a lot 
of attention. It made the point that Japan had taken over the 
semiconductor supply chain. They had taken over it. They led 
the world in semiconductors. Japan was on the same sort of 
exponential economic growth curve that China has been on for 
the last decade or more, and there was a lot of handwringing 
over Japanese threats of intellectual property. And what 
happened?
    First off, Japan, like China, suffered a massive real 
estate bust. That limited their ability to continue to invest 
in leading-edge technologies, and as a result, they lost the 
lead in semiconductors. They also faced an aging society, 
which, really, demographics is destiny, and we have to 
understand that, and they also lost the wage competition. Japan 
lost the wage competition with other low-cost providers, 
exactly what China is going through now, and we will be going 
through for the next decade, and we have to have that clearly 
in mind.
    I am most worried that China is going to misbehave because 
it will have the behavior of an oppressed rat rather than the 
behavior of a conquering hero. They are in deep trouble because 
of the collapse of the real estate bubble, which dwarfs the 
Japanese real estate collapse. Their regional governments are 
basically insolvent because of the gravy train from developers. 
It is a long story, the regional governments are basically 
bankrupt, and the central government is unwilling to bail them 
out, and the demographic projections are really daunting.
    The estimates are that sometime at the end of 2060 and the 
end of the century, China's population will be half of what it 
is today. There is never going to be this giant, $1.4-billion 
prosperous middle class in China. Their educational levels do 
not support it. Their forays into chip production have 
collapsed in a blaze of corruption, and they are just a 
complete failure.
    And the companies see this too, that there isn't going to 
be this massive middle-class market in China, and they've 
started to pull out. The Korean companies pulled out, tried 
pulling out starting several years ago and are finding what 
other companies find, that it is pretty much impossible to get 
your money back out of China, that when they build a shipyard 
or a port and they want to get their money back out from that 
investment, pretty much they have to just turn over the keys 
and walk away, and that is not a unique experience. And so, the 
attractiveness of China as a place for foreign investment is 
going way down as companies around the world understand this.
    I was just wondering if any of you have comments on the 
demographics of China and how that should affect our thinking? 
We will just start from the left. Mr. Ashooh, do you want to 
give it a shot?
    Mr. Ashooh. It is indisputable that that is a meaningful 
trend. It is outside my area of expertise, but what I would 
like to commend you for is the fact that so much of what we do 
with respect to adversary countries is in the near term. We 
need to be paying attention to long-term threats and their 
implications as well.
    Mr. Foster. Okay. Any other comments on that?
    Mr. Willems. Sure. I will go ahead and comment, and I think 
your comments are right-on. I do believe China is an 
existential threat to our leadership, but I don't think China 
is 10-feet tall. I think it is about 6'5'', 6'6,'' and we need 
to keep that perspective as we are addressing it. And in many 
ways, Xi Jinping is the country's worst enemy because his 
policies are inferior to ours.
    Mr. Foster. Agreed.
    Mr. Hill. The gentleman's time has expired.
    Mr. Foster. I yield back.
    Mr. Hill. It is now time to recognize the distinguished 
Chair of the House Small Business Committee, and a longtime 
member of this committee, Mr. Williams, for 5 minutes.
    Mr. Williams of Texas. Thank you, Mr. Chairman. And thank 
you to the witnesses for being here today. We need to be very 
clear. China is a hostile nation looking up to upend the United 
States' standing in the world. And as we saw with the spy 
balloon this weekend and that they brazenly flew over our 
airspace last week to send in fentanyl across our porous 
Southern border, China is attempting to weaken our country in 
any way possible.
    An important piece of this equation that we must take a 
serious look at is foreign purchases of farmland that is 
threatening our country's national scrutiny. In my home State 
of Texas, foreign entities control more than 4.7 million acres 
of land. We talked about that earlier, and I am also a rancher. 
So should any hostile nation like China want to cause permanent 
harm to our food security and domestic supply chain, this is 
how they would do it.
    Mr. Feddo, can you expand upon the threat that foreign 
agriculture purchases pose to our country's national security, 
and do you think Treasury is currently equipped to tackle this 
threat?
    Mr. Feddo. Sir, thank you for the question. I do think they 
are equipped. I know there have been a number of occasions 
where Congress has considered adding the Secretary of 
Agriculture to the voting members of the committee. The way the 
committee has been constructed by Congress, Treasury has the 
ability to bring in any department head at any time to 
participate in the analysis of an issue like food security, 
agricultural infrastructure security. And so, I do think they 
are equipped to do so.
    As to the bigger issue, I think my understanding is that 
the GAO currently is conducting a survey and a study of the 
extent to which foreign investors acquire agricultural land in 
the United States, and I would encourage Congress to hold its 
feet to the fire, so to speak, until it sees the results of 
that. My understanding is that at this moment, Chinese 
ownership of agricultural land in the United States is 
somewhere around 340,000 acres, and that is compared to almost 
900 million acres of farmland. So I just would suggest that 
before we move forward with our response from a national 
security perspective, that we make sure that we are not taking 
a baseball bat to something that needs a more precise scalpel 
to tackle.
    Mr. Williams of Texas. Okay. Thank you. The only thing they 
may understand is the baseball bat, though, at the end of the 
day, but our Southern border has been an absolute disaster over 
the last 2 years. Like I say, I live in Texas, and there are 
2.7 million people who illegally crossed the border in Fiscal 
Year 2022, 98 of whom were on the terrorist list. We have all 
seen these numbers, and the massive influx of people straining 
border towns is not the only problem. Drug smuggling has been 
on the rise. There have been 356 million lethal doses of 
fentanyl confiscated in Texas alone. This drug has been 
destroying communities across the country, and claimed the 
lives of 100,000 Americans last year. We are seeing future 
generations dying down there. So, we must get serious about 
stopping the border crisis_this Administration is not_so we can 
slow the spread of this deadly drug flooding our streets.
    Mr. Lorber, can you discuss China's role in the fentanyl 
crisis, and what sanctions could be effective, in your mind, in 
mitigating this problem?
    Mr. Lorber. It is a great question, and obviously a very 
terrible problem. To date, Treasury has taken a number of 
actions against Chinese entities involved in illicit fentanyl 
production and trade, coming over the border in particular. In, 
I think it was December of 2021, the Biden Administration put 
out an Executive Order focused on a certain range of topics, 
but focused specifically on Chinese entities involved in that 
activity. And likewise, I think just about a week ago, maybe a 
little bit more, there were a number of Chinese individuals and 
entities that were designated from a sanctions perspective for 
that activity. With that being said, I think there is a lot 
more that needs to be done and that should be a major focus of 
both law enforcement and intelligence as well as the Treasury 
Department.
    Mr. Williams of Texas. Okay. My last question is, over the 
last few years, the United States has faced significant supply 
chain disruptions. I am in the car business, so I can tell you 
all about supply chain. This exposed our reliance on China for 
trade and manufacturing. The United States needs to diversify. 
I think all of us understand our domestic manufacturing base, 
and that to be able to insulate ourselves from this global 
supply chain instability is critical. As we come out of this 
pandemic year, it is critical that we focus on creating more 
domestic supply chains, to prevent this from happening. 
Quickly, Mr. Willems, how can we increase our supply chain 
resilience, and what can we do to incentivize companies to move 
out of China?
    Mr. Willems. So, two quick ideas. First, in terms of trying 
to get them to move to the United States, we need competitive 
tax and regulatory policies. Second, in terms of 
diversification, I would look at a friend shoring strategy, and 
I would look at trade agreements as a positive incentive for 
companies to move out of China.
    Mr. Hill. The gentleman's time has expired.
    Mr. Williams of Texas. I yield back.
    Mr. Hill. I thank the gentleman from Texas. The Chair now 
recognizes the gentlewoman from Ohio, Mrs. Beatty, who is also 
the distinguished ranking member of our National Security, 
Illicit Finance, and International Financial Institutions 
Subcommittee, for 5 minutes.
    Mrs. Beatty. Thank you, Mr. Chairman. This question is for 
Mr. Harrell. I have a few questions I will try to get through. 
In 2019, led by this committee, Congress passed the longest-
term reauthorization of the United States Export-Import Bank, 
and now we have a new Chair who has been very clear that she 
wants to advance competitiveness. She also wants to take a look 
at targeting and expanding and diversifying. And we have heard 
from our financial services planning meeting that we are going 
to look at diversity and inclusion. So, I just wanted to put 
that in the record in my opening.
    But my question for you is, when we look at that 
reauthorization bill, which included the China & 
Transformational Exports Program, are there any ideas or things 
that you would want to share that EXIM uses, authority and 
other trade authorities to improve American competitiveness, 
especially in regard to what we are hearing about with China? 
What can we do through that authorization or through EXIM to 
help us? Any ideas?
    Mr. Harrell. Thank you very much for the question. I think 
both the EXIM Bank and the International Development Finance 
Corporation are a very important set of tools in our toolkit to 
compete with China. And I think the 2019 authorization you 
spoke about and the ability to create the Transformational 
Exports Program is a key piece of making EXIM competitive.
    I know that over the last year or so that Chair Lewis has 
been at EXIM, she has been working diligently to implement the 
Transformational Exports Program. I think it is important. The 
reality is if we are going to provide financing for a U.S. 
telecom maker to compete with a Chinese telecom maker in 
Argentina or somewhere like that, there has to be the kind of 
flexibility that is allowed under the 2019 authorization to 
recognize how the U.S. companies can actually put that deal 
together, and I think it is now there. I think that what we 
need are less additional changes to the statute of EXIM_I think 
you did that in 2019_and just some more time for Chair Lewis 
and all of the great staff at EXIM to go out and source the 
deals, because that takes time. So, I think that work is 
happening. It just takes some time to go find the deals.
    Mrs. Beatty. Thank you for that. And let me also put on the 
record that Chair Reta Jo Lewis has also created a new office, 
to have a bigger global footprint with the Office of Global 
Finance Development, so I think she has done an amazing job in 
a short period.
    Mr. Harrell, China has been taking advantage of America's 
lack of investments or presence everywhere from the Caribbean 
to Latin America to Africa to the Asia-Pacific region. Short of 
significant dollar increases in grants to these partner 
neighbors, and especially if my colleagues on the other side 
keep their promises to decrease the budget despite the many 
national security challenges, what can America do to offer 
alternatives to Chinese investments and trade to otherwise 
compete with China everywhere?
    Mr. Harrell. In a world where we may not be spending more 
Federal dollars going forward to build those relationships, we 
are going to have to be more creative in building private-
sector ties, potentially around supply chain resilience and 
potentially around technology. I look at the announcement 2 
weeks ago now between the U.S. and India, it was a government 
announcement, and what you are essentially seeing is a 
partnership between companies to work on AI, to work on space, 
to work on those kinds of things. I think that is an 
interesting model. I think you could take a similar approach in 
Central America or in the Caribbean where we can pull together 
manufacturers, for example, that are looking to diversify away 
from China, that are maybe currently making things in China, 
and encourage them to relocate into the Caribbean or into Latin 
America. So, we are just going to have to leverage the private 
sector better for those kinds of things.
    Mrs. Beatty. Thank you. And in my last few seconds, would 
you agree that it would be a good idea for us to promote 
American entrepreneurship? And the reason I say that is with 
CHIPS, we are saying that we need to have more small 
businesses, more entrepreneurs when we look at our national 
security. And my time is up, so I yield back.
    Mr. Hill. I thank the gentlewoman from Ohio. You can answer 
that question in writing.
    And now, we turn to the gentleman from Georgia, Mr. 
Loudermilk, for 5 minutes.
    Mr. Loudermilk. Thank you, Mr. Chairman. I appreciate 
everyone being here. It is interesting that the Bank Secrecy 
Act was brought up earlier, and while I don't necessarily 
disagree with the sentiment, I just don't know that the Bank 
Secrecy Act is the place to report real estate purchases. 
However, I believe the Bank Secrecy Act needs to be revised 
because we are dealing with reporting thresholds that were 
developed in the 1970s at $10,000, to where it should be around 
$65,000 to $70,000 today.
    One of the reasons that I think it is important for us to 
update those is because at these low thresholds, the government 
is forcing financial institutions to report significant 
information to the government of which the government is 
holding information about individual citizens and businesses 
that they are not utilizing. When I was in the intelligence 
arena in the Air Force, we had one principle, which was, if you 
don't need something, don't keep it, because you don't have to 
protect what you don't have.
    I know that the United States is a huge target for 
cybercrimes and for data breaches, and even U.S. law 
enforcement agencies have repeatedly called China the most 
significant state actor of threat to our country in cyberspace, 
which we know the government would be a target. Now, I bring up 
the Bank Secrecy Act because while we are trying to reform that 
so the government isn't keeping a lot of PII on citizens that 
could be breached to a foreign actor, U.S. regulators are 
implementing a consolidated audit trail which would also 
capture a lot of information and does capture information about 
investors.
    Mr. Lorber, we have worked to kind of minimize some of the 
information that is collected by the consolidated audit trail. 
But under the current iteration, the consolidated audit trail, 
the customer accounts and information systems would include 
names, addresses, and dates of birth for most U.S. investors. 
What risk would this information pose to U.S. investors if a 
foreign adversary, specifically the Chinese, were to gain that 
information?
    Mr. Lorber. Thank you, Congressman. It is a good question. 
I am not specifically familiar with the consolidated 
information audit trail that you are mentioning. However, I 
will say that any situation in which there is consolidated 
personal information about individuals, there is a risk that if 
that information is secured, or captured, or breached, that it 
could be used to develop information that could be used to 
compromise those persons or otherwise exploit information about 
them.
    Mr. Loudermilk. Yes. Mr. Willems, do you have any thoughts 
on the consolidated audit trail or the information, if it was 
divulged to China, that could be used against U.S. citizens or 
our economic stability?
    Mr. Willems. I think you are right to ask questions about 
it, but it is not my specific area of expertise.
    Mr. Loudermilk. Okay. Let me move on to another area of 
this. And as I said, there has been some progress in limiting 
the types of PII in the consolidated audit trail. For anybody, 
what type of retention policy do you believe would be 
appropriate to prevent any information, whether it is from 
consolidated audit trail, tax return information? What type of 
data retention policy do you believe would be appropriate to 
prevent information from falling into the hands of China or any 
foreign adversary? Anybody?
    [No response.]
    Mr. Loudermilk. I think this illustrates that we have some 
areas that we are still not really thinking about because a lot 
of times we are focused on China, as China versus the United 
States Government, when in reality it is China versus the 
individual citizen of the United States as well. And so, I 
think this is something that we need to invest time and effort 
looking into as far as protecting data and information from 
cyber actors.
    And part of that, and I will conclude with this, that I 
have said all along, the government is our biggest security 
risk because as it is mandating massive amounts of data to be 
collected from financial institutions, from individuals that is 
not used by the government. When you look at the currency 
transaction reports, over 90 percent of them are never looked 
at. I would imagine a near-same statistic on the other reports 
that have come in, suspicious activity reports. If we are not 
using the data, why are we collecting it? Why are we keeping 
it? Why are we mandating other institutions to provide it? With 
that, Mr. Chairman, I yield back.
    Mr. Hill. I thank the gentleman. Mr. Vargas from California 
is now recognized for 5 minutes.
    Mr. Vargas. Thank you very much, Mr. Chairman. I would like 
to thank Chairman McHenry and Ranking Member Waters for 
convening this hearing on such a pertinent topic. It is very, 
very important. Mr. Willems, did I hear you correctly or hear 
about you correctly that you were on the NSC for the previous 
Administration?
    Mr. Willems. That is correct.
    Mr. Vargas. Okay. During the time of the Trump 
Administration, did we have any Chinese incursions of these spy 
balloons?
    Mr. Willems. Like Mr. Harrell, I was part of the Econ 
office, not the defense or national security part of the NSA.
    Mr. Vargas. So, do you know or do not know, then?
    Mr. Willems. I am not aware. That is not my expertise to 
speak.
    Mr. Vargas. Right, not your expertise. It is not my 
expertise either, but I have heard one is flying around, right? 
Obviously. And we shut it down. So during the time that you 
were there, were you told that there was a Chinese spy balloon 
flying all around the United States?
    Mr. Willems. That is not the kind of thing I would have 
been briefed on.
    Mr. Vargas. Okay. So you didn't hear about that?
    Mr. Willems. That is not the kind of thing I would have 
been briefed on.
    Mr. Vargas. Okay. The reason I ask is it seems that there 
were a number of Chinese spy balloons that were flying around, 
and nobody shot them down. In fact, it seems like we didn't 
even know about them, sadly, talking about strength. They 
didn't even know they were there. This President gets 
criticized because he shot it down. The other President didn't 
even see the damn things. Anyway, I think it is a little bit 
like the hypocrisy of this debt limit when President Trump 
raised it 3 times, added $7 trillion to the deficit, and I 
didn't hear a peep out of my colleagues on the other side other 
than, raise it more, raise it more, and all of a sudden, now 
they are fiscal hawks. We have to do something about that damn 
deficit. Yes, after you guys raised it so much by giving all 
that money to the wealthy guys, great.
    But anyway, we are here about the CCP. I do want to ask 
this, and I want to acknowledge the comment that was made by 
some of my colleagues on the other side, and that was that we 
are really here to talk about the Chinese Communist Party, not 
the Chinese people, and make that distinction. The Chinese 
people are good people, like good people everywhere, and we do 
have a problem in this country with Asian hate and we don't 
want to flame that. But at the same time, we do want to go 
after our adversaries, our competitors, and that is the Chinese 
Communist Party, so I think it is very appropriate that we look 
at how we can fight back.
    And I was also very pleased to hear from some of my 
colleagues that they believe in the preeminence of the U.S. 
dollar and the dollar as the world's reserve currency. I think 
that is very, very important. I hope we keep that, but I would 
say this. We have done a lot. The Administration has done a lot 
to combat what the Chinese have been doing, the Chinese 
Communist Party. When China deployed its Belt and Road 
Initiative to increase its economic coercion across the globe, 
the Biden Administration launched the Partnership for Global 
Infrastructure and Investment with our G7 partners. When China 
threatened trading norms and international agreements in the 
Indo-Pacific, the Biden Administration launched the Indo-
Pacific Economic Framework (IPEF) with 13 partner countries 
that together with the U.S. represent over 40 percent of global 
GDP.
    When the CCP decided to detain and oppress the Uyghur, we 
passed the Uyghur Forced Labor Prevention Act, to ensure that 
our companies do not source products using forced labor in 
their production. When the CCP attempted to become the new 
manufacturing capital of critical computing components, we 
worked together on a bipartisan basis to pass the CHIPS and 
Science Act. When we needed to modernize our domestic 
infrastructure to ensure our companies can compete globally, we 
passed the Bipartisan Infrastructure Investment and Jobs Act.
    So yes, the CCP is a great threat, but when we work 
together across the aisle especially, and put people over 
politics, we can mount a focused response to increase our 
economic competitiveness and produce good clean jobs right here 
at home and protect our national security. And that is why I 
always find it interesting when we have some of my colleagues 
complaining about the Chinese. And I ask them, where is your 
suit made, and they say, I don't know. Why don't you take a 
look, and you find out it is made in China. So, where is your 
tie made? Made in China. Where are your shoes made? They look 
them up because they don't know they are made in China. So if 
we really do believe that we are competing, we should start 
buying American, and from some of our allies, instead of just 
buying the cheapest thing that you can find that looks good. 
With that, I yield back.
    Mr. Hill. The gentleman yields back. The gentleman from 
West Virginia, Mr. Mooney, is now recognized for 5 minutes.
    Mr. Mooney. Thank you, Mr. Chairman, and I do appreciate 
the comments from my colleague from California: distinguish 
between the people and the government. That is true of a lot of 
despotic governments around the world, in Iran and other 
places. My mother fled Communist Cuba where that country still 
oppresses their people every day. I also agree with his 
comments about buying American. When I go shopping with my 
three children for Christmas, it drives them crazy because I 
won't buy anything made in China, and they have a hard time 
finding stuff, presents for my wife and stuff that is not made 
in China. But it is true that we need to be more patriotic when 
it comes to that in this country.
    The Chinese government is moving rapidly toward 
implementing its digital currency, the digital yuan controlled 
by its central bank. Mr. Lorber, China is an authoritarian 
state and violator of human rights. Can you walk us through how 
the Chinese Communist Party can use its digital yuan to further 
crack down on dissent and the freedoms of its people?
    Mr. Lorber. Thank you, Congressman. I appreciate the 
question. I think the concern that has been identified here is 
essentially that by using the digital renminbi domestically, 
China would be able to secure more information about the 
transactional history, the transactional preferences, and other 
personal information about individuals and entities who are 
using that, who are using the digital renminbi. So essentially, 
it would give them additional visibility into what is happening 
within the country.
    Mr. Mooney. Thank you. That makes sense. The Chinese 
government spies on everybody, and its own people are not free 
of that. Many advocates of this central bank digital currency 
(CBDC) here claim that the U.S., in not moving forward with a 
CBDC, risks losing the U.S. dollar's status as a reserve 
currency.
    Mr. Lorber, if the U.S. does not move forward with this 
central bank digital currency and instead allows private-sector 
digital currencies to thrive, does that actually risk the U.S. 
dollar's reserve currency status?
    Mr. Lorber. I can't speak to the sort of broader 
macroeconomic questions about the adoption of a Federal CBDC. 
What I will say, and going back to an earlier conversation we 
had on this, is that I don't necessarily think that the rise of 
the Chinese digital renminbi for cross-border payments poses a 
major national security challenge to the dollar in the short 
term. I think it is something which is very warranted to look 
at in the medium term. But at least in terms of the next, I 
think Mr. Harrell used the timeframe of 12 months, I would say 
for the next few years, it is not something which would 
displace the dollar or create a risk of the displacement of the 
dollar.
    Mr. Mooney. Okay. Thank you for that answer, but we all 
know that President Richard Nixon finally took us off the gold 
standard when he was President, and now the U.S. dollar is 
simply the full faith and credit of the United States of 
America. It is not tied to anything. I have a bill to go back 
to the gold standard. I have invited my colleagues on the other 
side of the aisle, if they are really serious about the dollar, 
to tie it back to the gold standard, make it a superior product 
that way, but they won't do it. They refuse because they want 
to play all the games they want to play with the Fed. And so, 
you have the rise of digital currency, also not tied to 
anything specific, not much different than the U.S. dollar. So, 
let's go back to the gold standard if we are serious about 
this.
    I appreciate that we are having this important hearing. 
There is no doubt that China is our top competitor and 
adversary. The Chinese Communist Party, their government, likes 
to cheat and impress their own people. We have a lot of work to 
do to hold China accountable, and just because China is doing 
something doesn't mean the U.S. has to follow. They are a 
communist government, and we are a free-market economy here. We 
don't have to follow them. In fact, we should be very skeptical 
of following them. The United States has the best free market 
system in the world, and that is precisely why we do not run 
our country the way China does and why we are the greatest 
superpower the world has ever seen. So, let's not make a 
mistake here.
    With that, Mr. Chairman, I will yield back the balance of 
my time.
    Mr. Hill. The gentleman yields back, and we now turn to Mr. 
Casten for 5 minutes.
    Mr. Casten. Thank you, Mr. Chairman, especially to our 
witnesses, and I want to start by answering the question that 
Mr. Posey asked because I think it is worth having this on the 
record. He asked how much U.S. debt is held by the Chinese. The 
answer is, just over a trillion dollars. Interestingly enough, 
that is actually down from the peak in 2011, when it was $1.3 
trillion. It is now down to $1 trillion, and that is in spite 
of total foreign holdings of U.S. Treasuries being up about 80 
percent during that period. And I mention that because, yes, we 
should be very concerned about our competitors, but numbers 
matter, right?
    Mr. Harrell, I would love to get some sense, because that 
broader narrative, if you go beyond just debt and look at total 
foreign investments in U.S. securities, China is declining and 
declining in terms of its importance in the U.S. economy. In 
2010, they held $1.6 trillion total U.S. securities, about 15 
percent of foreign investments in U.S. securities. They are now 
down to less than 6 percent of the total holdings in U.S. 
securities.
    And so my question, Mr. Harrell, from as far as how it had 
sort of fallen in Mr. Foster's question is, should we see China 
as a country that is pivoting away from investments in the U.S. 
to invest in other places, or should we see them as a country 
that is having a harder time attracting investment revenue more 
broadly? And I don't have the data on national trends, but I am 
wondering if you have a sense of that?
    Mr. Harrell. Thank you for coming back to this topic. It is 
interesting. In addition to seeing this decline in kind of 
Chinese sovereign holdings of U.S. debt, we have, over the last 
couple of years, generally seen a decline in Chinese private 
investment in the U.S., driven in part by the 2018 pharma law 
toughening up standards for Chinese investment in the United 
States.
    I think we are seeing a couple of things from a Chinese 
macroeconomic perspective. First, we have seen China's overall 
balance of payment surplus come down a bit over the last couple 
of years, obviously 2020, in particular, and the last couple of 
years where they had a bunch of lockdowns, and that threw off 
their trade flows. That has brought their balance payments 
surplus down, so I think they have less money to park abroad 
than they used to. I think they have been trying to park more 
of it outside the U.S. for two reasons. First, they do see it, 
as we see with BRI and things like that, as a way of trying to 
build their own friendships and alliances away from the U.S., 
with developing countries. So, I think they are looking to put 
it elsewhere.
    And then, I think they do look at the risk of confrontation 
with the U.S. and wonder if they are overexposed from their 
perspective to U.S. securities. We saw Russia essentially exit 
the U.S. dollar as a reserve currency back in 2018; they 
essentially got out of it. China can't, for various reasons, 
and I don't think wants to take that extreme of a step, but I 
do think they are looking from their kind of sovereign holdings 
to diversify their holdings and not be, from their perspective, 
overexposed.
    Mr. Casten. Okay. I have two more questions, and I 
apologize if I cut you off on the first one because I want to 
be quick. But we have seen China invest in things like 
buildings that don't get occupied, ever grand that they have to 
bail out, and there are political reasons to invest in that. 
But obviously, long term it is not healthy in terms of their 
domestic investments. Have you seen any good analysis of what 
kind of return China earns on their domestic investments? To 
what degree are they investing in growth versus staving off 
short-term political problems?
    Mr. Harrell. As I think Mr. Willems said a couple of 
minutes ago, it is important that we not overestimate the 
strength of China. It is a fierce competitor. It is not, as I 
think you said, 10-feet tall. And I think we have to be clear-
eyed about their own domestic weaknesses and the fact they 
don't have an indefinitely bright future. In fact, they have a 
bunch of bleak things in their economic future. For the last 
couple of years, they have been propping up their economy 
domestically by subsidizing a real estate boom, by subsidizing 
manufacturing. At some point, that gets harder and harder for 
them to do, and I think that is why you are seeing this long-
term downward trend in growth. This year, it probably will come 
up. They are coming out of COVID. There will be a rebound, but 
they are not getting back to the 7, 8 percent growth rates they 
had for many years past.
    Mr. Casten. We are tight on time, so I may have to just end 
with a statement here, but the one exception to all that is 
that Chinese investments in U.S. equities have gone up, even as 
their investments in debt have gone down, and that is a broad 
sectoral trend from foreign investments in the United States. 
In 2010, total foreign investments in U.S. equities was $2.8 
trillion. That was 26 percent of total investments in equities, 
securities.
    In 2021, more than half of foreign investments in the 
United States were in equities. And I mention that because if 
your goal, as a Member of Congress, was to transfer wealth from 
U.S. taxpayers to foreigners, 10 years ago the way to do that 
was to raise interest rates.
    Mr. Hill. The gentleman's time has expired.
    Mr. Casten. Today, the way to do that is to cut corporate 
tax rates. I yield back.
    Mr. Hill. The gentleman's time has expired. I now recognize 
the distinguished gentleman from Ohio, Mr. Davidson, who is 
also the Chair of our Housing and Insurance Subcommittee, for 5 
minutes.
    Mr. Davidson. Thank you. And thank you to our witnesses. I 
appreciate this hearing and the importance of it. China is an 
important strategic rival. Frankly, I would like to keep them 
as economic rivals. As a former military guy, I didn't think we 
would ever visit China in friendly terms and conditions, and I 
hope that we can keep it friendly competition. We are concerned 
about recent events and kind of what does that signal for the 
relationship.
    But as we look at how has China risen, and part of it was 
under Deng Xiaoping, China broke from what had failed, cultural 
revolution, Mao's various forms of Marxist ideology that 
produced a communist state that was not working. And under Deng 
Xiaoping, he kind of said, well, we will have communism with 
Chinese principles, which is really state-controlled 
capitalism, and on balance, it has worked pretty well for the 
Chinese people, but part of that has come at the expense of the 
American people. I am happy for the average Chinese person, and 
we certainly understand why they want a better future for 
themselves and for their kids, but we should want the same for 
our families.
    In recent history, we have seen this generation say that 
they are not confident that their kids are going to have a 
better future than them. That is the first time in American 
history that has been true, and why is that? Part of it is 
policy decisions that have overwhelmingly benefited the Chinese 
Communist Party, and the influence of China. So as we talk 
about the role of financial services in that, in 2019, China 
was designated as a currency manipulator. Would one of you care 
to highlight briefly for the people watching at home, the 
dozens or so, how does China control their exchange rate with 
the United States? Mr. Lorber?
    Mr. Lorber. I am not a macroeconomist, so I can't really 
speak to that in an effective way. I apologize.
    Mr. Davidson. That's okay. It trades in about a 2-percent 
band. The U.S. dollar is one of the currencies that is in 
there, and it is a peg, so they set it at an artificial rate. 
So when they decide that they are not getting enough exports 
out of China into America, or, in particular, they will change 
the peg to the U.S. dollar. And that makes everything cheaper. 
So in 2019, when they did that, they moved it by about 16.8 
percent, and for that, the Secretary of the Treasury rightly 
designated them a currency manipulator, that is able to 
overcome all sorts of things, tariffs at the time. Fine, we 
will just manipulate our currency and make everything 
different.
    The other thing that I am interested in talking about in 
this space is kind of the link to the Belt and Road Initiative. 
Of course, it creates big trade consequences, and that creates 
consequences on the flow of cash, the balance of payments. When 
you look at the role of the International Monetary Fund and 
liquidity globally, Special Drawing Rights are one of those 
things. It is not really money, but it represents an asset, and 
the mix was recently changed. It went from about 10 percent RMB 
to almost 13 percent RMB.
    And the bill that I have, H.R. 510, the Chinese Currency 
Accountability Act, requires the Secretary of the Treasury to 
oppose an increase in the weight of China's RMB in the basket 
of currencies that make up the IMF Special Drawing Rights 
unless China meets certain international standards, and we know 
China doesn't meet them. They promised to be part of the World 
Trade Organization, that they would be a market economy. They 
said that as part of being a market economy, they wouldn't do 
things like manipulate their currency.
    Mr. Willems, could you please talk about those dynamics, 
particularly in relation to the IMF?
    Mr. Willems. Sure. Let me first say, I think you have put 
your finger on a really important issue, and from a broad 
standpoint, we want to promote the supremacy of the U.S. 
dollar, and we should be concerned about China trying to put 
forward the RMB as an alternative to that and including it in 
the IMF. So, I would want to work with you on the specifics of 
the bill. I think the concept is correct, and we should do what 
we can to prevent them from increasing the role of the RMB.
    One of the problems with the IMF that we often run into is 
our ability to unilaterally achieve things as opposed to having 
to work and develop broader coalitions. So, I would want to 
think about the right criteria to build that coalition of 
allies to get the job done.
    Mr. Davidson. Thank you, and my time has expired. I yield 
back.
    Chairman McHenry. The gentleman's time has expired.
    We will now recognize the gentleman from New Jersey, Mr. 
Gottheimer, for 5 minutes.
    Mr. Gottheimer. Thank you, Mr. Chairman, and 
congratulations again on your new role.
    The Chinese Communist Party, or CCP, embodies one of the 
most significant international threats the United States has 
faced in recent decades. Among other strategies, the 
authoritarian CCP hopes to dominate the global economy, as you 
know, through thefts of intellectual property, investments in 
foreign economies through their Belt and Road Initiative, and 
through the promotion of alternative financial networks that 
undermine the U.S. dollar's role in the global economy. 
Congress has written strong bipartisan legislation to take on 
China, and I am confident that we can do it again here in the 
118th Congress.
    I guess I will start with Mr. Harrell. The Bipartisan 
Infrastructure bill, and the CHIPS and Science Act directly 
support our strategic competition with China by investing in 
our supply chains, our workforce, and emerging technologies. In 
your opinion, what should a CHIPS 2.0 bill look like? What are 
the best next steps for us to be working on now? Mr. Harrell?
    Mr. Harrell. Thank you very much, and I 100-percent agree 
with you that the bills that Congress passed over the last 
several years to foster investments in chips and scientific 
innovation, in clean energy technology, and in infrastructure 
generally, are absolutely essential to our success.
    I would break future investments into two pieces: one is a 
technology piece; and one is a supply chain resilience piece. 
On the technology piece, and I think there really is a lot that 
is going on there not just with CHIPS but with the and Science 
part of that bill and the NSF sort of reform agenda there, I 
think there is a lot going on there, but I do think we need to 
be focused at a research perspective in quantum and in 
biotechnology. These, I think, are foundational that we need to 
do. On the supply chain resilience piece, we have done a lot on 
chips. We have actually been doing a fair amount on critical 
minerals, it is going to take years for that to bear fruit, but 
there is a lot going on with critical minerals, and we are 
doing a lot on clean technology.
    I think pharmaceuticals and pharmaceutical ingredients, not 
necessarily high-end things, but we have supply chain 
vulnerabilities there. I also think there are a set of supply 
chain vulnerabilities that we don't know we have. And I think 
that the Administration should undertake a kind of 
comprehensive review of what we are importing and supply chain 
vulnerabilities to get ahead of the things we don't know that 
we don't know.
    Mr. Gottheimer. That is very helpful. I appreciate it. The 
CCP has made it clear that it will leverage technology to 
breach U.S. institutions and steal our intellectual property, 
and collect data on our citizens and access the systems that 
control our critical infrastructure. I worked in a large 
technology company before I was in Congress, and it was no 
secret that China was stealing our work all the time.
    I guess, Mr. Lorber, if I can ask you if it is appropriate, 
what can we do to better protect our intellectual property from 
cybercrime and the coercive tactics the CCP is using to steal 
from companies operating in China?
    Mr. Lorber. Thanks. It is a great question. The objective 
is, I think, rightly, to protect U.S. data. There are multiple 
steps you can take, to borrow one of Mr. Willems' ideas, both 
on the offensive and the defensive side. Certainly on the 
offensive side, I do think that if that is your goal, targeted 
economic sanctions to focus on specific entities that have been 
identified as stealing U.S. intellectual property makes sense. 
And to date, I think there is authority that was recently 
passed on the books to be able to do that, although I don't 
know if there is actually any designations that have taken 
place. And then, on the defensive side, certainly the hardening 
of U.S. Governmental systems, but also proper incentive 
structure to make sure that the U.S. private sector is also 
properly incentivized to harden their systems as well.
    Mr. Gottheimer. That is right, and I appreciate that. 
Shifting just a little bit to the subject that I am very 
concerned about, of course, during the pandemic, we had a lot 
of fake N95 masks with fake FDA approval labels. We read about 
adulterated diabetes treatments and seizures of fentanyl-laced 
pills that have been traced back to China. And I am concerned 
we are not doing enough to crack down on sustained efforts from 
foreign actors to flood our markets with counterfeit and 
adulterated medical products.
    Mr. Harrell, if I can ask you, do you think it makes sense 
to increase collaboration between the Office of Foreign Assets 
Control and the FDA to crack down and place sanctions on 
foreign producers of counterfeit and adulterated medical 
products?
    Mr. Harrell. I think there are a number of tools we can use 
to go after counterfeit product imports. I think that where 
there is sort of a nexus to organized crime, there are existing 
sanctions authorities that can be used to target sort of 
organized criminal counterfeiting, and I think we should be 
looking to do that. I also think, obviously, there are things 
we can do with Customs and Border Protection (CBP) and with 
other tools that we have to crack down on imports of 
counterfeits. May I make one point on the data issue?
    Mr. Gottheimer. Please.
    Mr. Harrell. There are many things we need to do to protect 
our data security. One of them has to be a comprehensive 
national data privacy law because if all of the data is getting 
collected and aggregated, the Chinese are going to get at it. 
They have lots of ways to get at it, so we have to actually 
start with a data security law.
    Mr. Gottheimer. Thank you. I yield back.
    Chairman McHenry. We are glad you are before the committee 
that actually does have a data security law for financial 
firms, which we intend to update. Thank you. Hopefully, we can 
have you back for that, too.
    With that, the gentleman from Tennessee, Mr. Rose, is 
recognized for 5 minutes.
    Mr. Rose. Thank you, Chairman McHenry and Ranking Member 
Waters, for holding this hearing, and thank you to our 
witnesses for taking the time to be here with us today.
    I want to dive right in. About $1.7 trillion in securities 
of China-based issuers are listed on exchanges in the United 
States. Mr. Willems, as China continues to bolster its efforts 
to compete with the U.S. for capital, do you think U.S. 
investors have adequate information to understand their 
exposure to Chinese capital markets and the risks associated 
with them?
    Mr. Willems. Let me first say that I don't think inherently 
we don't want any Chinese companies listed on U.S. exchanges. 
As long as they play by the rules, it is good for us because it 
bolsters the importance of our markets. That said, I don't 
think U.S. citizens generally understand what they are getting 
into with some of those investments and more transparency could 
be helpful.
    Mr. Rose. Some managers offer single-country funds that 
only invest in Chinese-related issuers. Among the risks listed 
in these funds or these types of funds are more frequent 
trading suspensions and government intervention, currency 
exchange rate fluctuations or blockages, price volatility, and 
considerable degrees of social, legal, regulatory, political 
and economic uncertainty.
    Mr. Willems, are you concerned about the risks associated 
with offering an investment product with that much exposure to 
China?
    Mr. Willems. I do think that having disclosure about that 
is important so investors can make the decision.
    Mr. Rose. And I want to open this up to the rest of the 
panel. Would it make sense to require all funds, including 
broader international and regional funds, to disclose and 
aggregate their exposure to Chinese-related risks and 
investments? Anybody who wants to speak up. I'll start with 
you, Mr. Willems, since I have already.
    Mr. Willems. I think in concept, having transparency is 
important. In terms of the specifics of what you are proposing, 
I would want to think about that.
    Mr. Rose. Would anyone else care to comment on that?
    Mr. Lorber. Yes, I will echo Mr. Willems' comment. I do 
think transparency is very important, but I think there is 
obviously a balance between wanting to provide for that 
transparency and not creating a regime where there are overly-
onerous disclosure requirements.
    Mr. Rose. And I think about my own posture as an investor, 
so I will ask a question this way to kind of press this 
further. Do current disclosure regimes adequately alert U.S. 
retail investors and retirees to their Chinese exposure, yes or 
no? We will start over here.
    Mr. Ashooh. I think, based on the response you are getting, 
it is a question that needs to be addressed.
    Mr. Rose. As an investor, I think the answer is no. I have 
been pressing my own investment advisor about that. And then, 
what can or should be done to improve the level of visibility 
that individual investors, U.S. investors have to the exposure 
that they have to China, that they may or may not be aware of? 
Does anyone have any thoughts?
    Mr. Willems. I think I have already offered the idea of 
greater transparency, how you do that is important, and I think 
that is a subject that we should delve into further.
    Mr. Rose. Okay. Thank you. I think it is insightful. I want 
to shift gears in the remaining minute-and-a-half here.
    Mr. Feddo, if a foreign investor takes control of a U.S. 
business in the agricultural sector, does CFIUS have the 
authority to review that deal?
    Mr. Feddo. It certainly does.
    Mr. Rose. And if a foreign investor were to take a non-
controlling stake in an agricultural business, but gain 
influence over critical technologies or critical 
infrastructure, as specified in rulemaking, would CFIUS have 
the authority to review that deal?
    Mr. Feddo. I imagine so. Based on what you have described, 
yes.
    Mr. Rose. And so, when CFIUS reviews agricultural-related 
transactions, does CFIUS involve the U.S. Department of 
Agriculture in those reviews?
    Mr. Feddo. Yes, sir, it does. I mentioned earlier that that 
they have the latitude under the law to bring in other Cabinet 
Member officials and their departments to provide the subject 
matter expertise to tackle the national security analysis, and 
they do that frequently with the Department of Health and Human 
Services (HHS), NASA, and the Department of Agriculture.
    Mr. Rose. And do you think that CFIUS has adequate 
motivation to aggressively review those kinds of transactions?
    Mr. Feddo. They absolutely do, and that is part of the role 
of congressional oversight, to make sure that they are 
adequately focused on those issues. I would caution, I am not 
entirely sold on the idea of making the Agriculture Department 
a permanent voting member of the committee.
    Mr. Rose. Thank you. I appreciate your responses. I yield 
back.
    Mr. Steil. [presiding]. The Chair now recognizes Ms. Garcia 
for 5 minutes.
    Ms. Garcia. Thank you, Mr. Chairman, and thank you to all 
of the witnesses today. And I, too, want to associate my 
remarks with the ranking member and add my additional remarks 
as follows. I am concerned by the rhetoric that I am hearing 
today. While I take the economic threat that China may pose 
very, very seriously, I worry that the Republican Majority is 
not committed to taking some essential steps to combat this 
issue. The Republicans are set on decreasing the Federal 
budget, but it appears to me that significant investments might 
be necessary, particularly in the global south, to ensure that 
China's presence does not grow stronger.
    I would like to begin by focusing on China's strong 
financial presence in Latin America. As a Representative from 
Texas, this issue is too close to home, literally. China has a 
large financial presence in Venezuela, Ecuador, Brazil, and 
many other Latin American nations, and I worry about the impact 
it has on U.S. influence and trade relations, particularly as 
it impacts us in the Texas region.
    Mr. Harrell, can you please speak about China's presence in 
Latin America, and can you explain what the United States can 
do to offer alternatives to Chinese investments, in particular 
in that region?
    Mr. Harrell. We have definitely seen an increase in China's 
economic presence in Latin America over the last decade. Recent 
events disclose perhaps also an increase in surveillance 
presence and other kinds of presence down there as well. Part 
of the reason for that increased presence is, frankly, sort of 
basic economics. China is buying a lot of commodities, Latin 
America exports, and with a lot of commodities, you are going 
to see the trade ties increase there. There is also obviously a 
strategic overlay that China is taking to this where they are 
deliberately investing in Latin America as a region that is 
near to the U.S., but frankly, a swing region, where our 
diplomatic relationships have not always been the warmest and 
our economic ties have not always been the strongest. You see 
them doing that with Ecuador. And you see them doing it with 
Venezuela and places like that.
    I think what we need to do to respond is to, first, 
relentlessly highlight the downsides and costs of this kind of 
low quality, high-debt, high-default kind of Chinese investment 
we are seeing down there; and second, be forward in the region 
ourselves. We have to get DFC down there. We have to get EXIM 
down there. We have to make the Americas Partnership for 
Economic Prosperity a real thing. We have to get USAID active 
down there. So, it is highlighting both the costs and the 
challenges of what China is doing down there, while also 
offering concrete and tangible alternatives ourselves.
    Ms. Garcia. Right, because we are seeing that they are 
lending, they are investing, they are building, and they are 
developing. They are doing, in my view, a lot of things that we 
as a good neighbor in the Western Hemisphere should be doing 
with the Americas, and we have failed to do, frankly, for a 
really long time. And it worries me that that China will get a 
better strategic position to not only threaten us economically, 
but strategically in terms of our security. What else can we do 
to make sure that the United States maintains good relations 
with the Americas?
    Mr. Harrell. I laid out a couple of ideas. I also think, 
frankly, having continued strong cultural exchange programs 
often gets overlooked in these discussions. But as a former 
diplomat of the State Department who then spent a number of 
years at the White House, the number of times we were able to 
build a relationship with, whether it was a European official 
or an Argentinian official or an Indonesian official, because 
that person had come here for school, because that person had 
family here, those are sort of the soft power kind of things 
that can really pay off over time in terms of deepening 
relationships.
    Ms. Garcia. Right, because otherwise, China just continues 
to use these countries for their own political purposes, but 
also to build in what I consider the anti-USA sentiment. And it 
doesn't help, again, to listen to some of the rhetoric of 
beating up on everything south of the border. Rather than 
criticizing, we should be helping and being true partners and 
true neighbors. So, thank you for that. I yield back.
    Mr. Steil. Thank you very much. The Chair now recognizes 
Mr. Norman for 5 minutes.
    Mr. Norman. I want to thank each of you for taking the time 
to come here today and testify. Each of you have a critical 
role in highlighting the problems we have with China. And, Mr. 
Feddo, you made an analogy about the 355,000 acres as it 
relates to the total United States. The problem that I see is, 
it is not the volume; it is where they are buying it. In South 
Carolina, we have Duke Energy. We have Shaw Air Force Base. 
They are buying property in downtown areas strategically in 
relationship to where our headquarters are, so that is the 
problem we have with them.
    I think it was interesting that my other colleagues were 
asking you, Mr. Willems, about the balloon. First of all, they 
went immediately to President Trump with balloons flying. And 
the only way this Administration knew the balloon was flying 
was when a citizen took a picture. And either he was sleeping 
or whomever didn't notify him, if they were allowed to go 
across this country for 8 days before they shot him down, which 
is a tragedy for this country, and is a security risk for this 
country. Not to mention what they are doing in plants. In my 
State, they are going in plants, and they are going through 
third parties in buying the property. But they are sending 
Americans in to buy patents on different military things that 
others don't make, and stealing the patents, so they are a huge 
threat. So, thank you all for what you are doing to highlight 
this. This isn't political. This is un-American, particularly 
with what this Administration is letting happen.
    And this goes back to what Mr. Rose was saying, that the 
PCAOB has been tasked with scrutinizing the U.S. companies 
traded in U.S. Exchanges, and the Chinese companies. And after 
3 years, if they failed to provide the audits, then they are 
taken off the Exchange. Do you believe the PCAOB has 
successfully implemented this and are putting the safeguards in 
place so that those individuals who are putting their trust in 
companies that they know little about_is this getting the job 
done, or is there something else we need to be doing to put 
some teeth into this, because this, again, like the security 
breach, is a tragedy. And I will let anybody answer who wants 
to.
    Mr. Willems. I can start and just say I think at this point 
we should take the PCAOB's word for it that they were able to 
access Chinese papers, Chinese audit papers in December, and my 
understanding on that was that the checks that they did were 
random. The Chinese didn't know in advance that they were given 
access. Now, I think you are right to wonder, was this a one-
time thing where China wanted to avoid mass de-listings, or is 
this actually China finally saying, we are going to open up and 
play by the rules that everyone else has to follow? I think 
Congress' role is to conduct rigorous oversight over this, to 
make sure that the PCAOB is continuing to check and that China 
is continuing to provide access.
    Mr. Norman. Would anybody else care to comment on that? 
What about the Foreign Investment Risk Review Modernization Act 
(FIRRMA), which has expanded the jurisdiction of Committee on 
Foreign Investment in the United States (CFIUS)? Are they using 
the tools at their disposal to put teeth in there, and what 
they can do at the proper time?
    Mr. Feddo. Sir, I am probably the right person to answer 
that.
    Mr. Norman. Yes, sir.
    Mr. Feddo. But can you clarify the question?
    Mr. Norman. The role FIRRMA_are they doing everything they 
can they have been tasked with, in your opinion, in your 
expertise, to monitor real estate transactions and_
    Mr. Feddo. I believe so. I don't have any visibility 
internally. I implemented the law, and we were very diligent 
about how we scoped real estate jurisdiction per the direction 
of the statute per FIRRMA. And remember that the jurisdiction 
that the committee was given with respect to real estate was a 
voluntary disclosure. So, there is not a required filing, but 
the committee still has the power to bring something in if it 
needs to or it is alerted to a national security risk that 
warrants review. Frequently, a purchase relates to a U.S. 
business and it falls into another part of jurisdiction, so 
real estate may not always be leveraged, but it may not need to 
be.
    Mr. Norman. Thank you so much.
    Mr. Steil. The Chair now recognizes the gentleman from 
North Carolina, Mr. Nickel, for 5 minutes.
    Mr. Nickel. Thank you very much. And thank you to our 
witnesses for being here with us today. This is certainly going 
to be a memorable committee hearing for me, not necessarily 
because of the subject, as much as it is my first committee 
hearing as a Member of Congress, and you will be the first 
witnesses that I get to question, so thank you again for being 
here today.
    Mr. Harrell, you said in your testimony that to address the 
economic risks we face from China we must expand our 
cooperation with friends. Mr. Willems, you said in your 
testimony that to reduce supply chain reliance on China, we 
should implement proactive trade policies with third countries. 
I agree with both of you. The U.S. should establish and 
reinforce meaningful trade relationships with other partners in 
the Indo-Pacific region. The U.S. should also form and 
strengthen partnerships in law enforcement and regulatory 
spaces on issues central to this committee, like countering 
trafficking, improving transparency, and securing markets. So, 
Mr. Harrell and Mr. Willems, how can the U.S. leverage the 
tools that are at our disposal, like the World Bank, the IMF, 
and the Export-Import Bank to help America's friends better-
compete against China and their CCP-backed economy?
    Mr. Willems. Sure. I am happy to start, and I think this is 
actually a really good segue from the questions Ms. Garcia was 
asking, which were about Latin America, and I thought Mr. 
Harrell answered them very well. But one area I would have 
elaborated further on that you have touched on is trade 
agreements. If we want to build those relationships, if we want 
to build those partnerships, we need to have trade agreements. 
And the reason that is important for supply chains is that 
China is going around the world and they are cutting trade 
agreements, where they are cutting tariffs with other 
countries, that makes it easier for them to facilitate trade 
between them.
    We aren't doing the same thing, and so we are at a cost 
disadvantage when companies are making decisions about supply 
chains, and that is why we need market access trade agreements. 
Building on that, the other tools that Mr. Harrell touched on 
that I would elaborate on again include the Development Finance 
Corporation (DFC), and one of the things I recommend is 
employing a program at the DFC similar to the China & 
Transformational Exports Program (CTEP) at EXIM, which will 
allow DFC to cut through red tape, and be more strategic in 
working with our partners and allies.
    On EXIM, one thing that we haven't gotten into yet, but I 
think is worth considering, is do we want EXIM to be able to 
take more risk in certain circumstances? EXIM has something 
called the default cap, in which about 2 percent is the maximum 
amount of defaults that they are allowed to have or they 
totally lose their authority to make investments. And I think 
we need to look at that and say, look, if we are going to 
provide an alternative to China, we need to take a little more 
risk, and it may be a controversial policy, but I think it is 
worth looking at if we are serious about providing a real 
alternative.
    Mr. Harrell. I think another area that we could look at is 
better integrating our development tools with our trade tools, 
because if you are a company, that is, say, looking to get out 
of China to do light manufacturing, and you are looking at 
Latin America, what do you need to put a facility down in the 
Caribbean or somewhere in Central America or in Mexico? You 
need local skilled labor, right? You need a bunch of things on 
the ground. You need transport and physical infrastructure for 
the goods you are manufacturing, and then you need access to 
the United States so you can actually sell it here in your 
market.
    I don't think we currently do a good job of kind of 
integrating those three tools. And I think we could do a better 
job of saying, if we want to see supply chain friend shoring, 
how are we going to use our foreign assistance, our development 
finances, and other kinds of tools to create the enabling 
environment for that to happen, as we pursue these kind of more 
trade initiatives whether it is the Americas Partnership for 
Economic Prosperity (APEP), or the Indo-Pacific Economic 
Framework (IPEF), or other things like that?
    Mr. Nickel. Thank you very much. I yield back.
    Mr. Steil. Thank you very much. The Chair now recognizes 
himself for 5 minutes.
    Mr. Willems, today we have had a lot of conversation 
focused on China, about their malicious actions. We have heard 
references to invasions of our airspace most recently. We have 
seen them engage in unfair trade practices. You were just 
engaged in a conversation with Mr. Nickel, I think 
appropriately so, about how we can go on offense. I think we 
have seen a real shift in Administrations, from a shift in 
Administration, or the Trump Administration, with engagement in 
countries looking for areas where the U.S. can export. In 
particular I am thinking from Wisconsin's perspective, 
agricultural goods, thinking about opportunities we may have in 
countries like Kenya, countries like the United Kingdom, maybe 
the country of Laos, et cetera. Can you tell me where we could 
go on offense?
    Mr. Willems. It is a fantastic question, and you mentioned 
two already. The Trump Administration had started FTA 
negotiations with both the U.K. and Kenya, which have been 
discontinued by this Administration, and I think it is in 
Congress' interest to push them to get back in the game with 
those two countries. Another place I would look is Taiwan, 
where there is significant interest in linking our high-tech 
supply chains with Taiwan and creating more market access for 
farmers, including those from Wisconsin, which I know we both 
hold near and dear to our heart.
    And then, I would look at the Trans-Pacific Partnership 
(TPP), and I was part of an Administration that pulled out of 
the TPP, but that was, I think, a reflection of the fact that 
there were problems with the agreement. But the answer is not 
to stay out of it; the answer is to renegotiate it. And I would 
look at this question, can we do to TPP what we did to the 
North American Free Trade Agreement (NAFTA)? Can we take an 
agreement that wasn't working for us, renegotiate it, and make 
it work for the United States? And I will remind everyone here, 
I am sure there are a lot of Members here who voted for the 
United States-Mexico-Canada Agreement (USMCA). That got the 
strongest bipartisan support of any trade agreement in years, 
and I think we can do the same thing with the TPP, and I think 
that will benefit Wisconsin farmers.
    Mr. Steil. Thank you very much, and thank you for your 
comments. Let me shift gears to another area where I have 
significant concerns, and that is our multilateral development 
banks, like the World Bank, still providing billions of dollars 
in new loans to China. And at the same time, China is providing 
extensive funding to developing countries around the world 
through its Belt and Road Initiative. Should China continue to 
receive funds from these development banks, and how should we 
approach this strategically?
    Mr. Willems. The answer is no, and I will agree with you, 
it is absurd, right? China is the world's largest bilateral 
lender, yet, at the same time, they are one of the top five 
recipients of World Bank loans. That is an inconsistency that 
should not be allowed to stand.
    The challenge we have with the World Bank, and the IMF, and 
all of these institutions is that we are just one member. We 
have a lot of votes, but we don't have all of the votes. We 
can't wave a magic wand. So, I really think what you want to do 
is think about how to put together a comprehensive reform 
package with other allies that can change that behavior, while 
also thinking about other things that will get other countries 
to come on board. If this just becomes U.S. versus China, I 
think that is difficult, but if we can paint China's 
international outlier and build a broader coalition, I think we 
have a chance for success.
    Mr. Steil. I think that is right. I think it is working 
with our allies to actually counter the actions that China is 
engaged in, in particular as it relates to unfair trade 
practices. But we also see it through their loan programs such 
as the Belt and Road Initiative, which is a real risk to many 
developing countries around the world.
    I want to go back to what Mr. Barr was talking about 
earlier, in particular, Chinese military-industrial companies 
and the firms associated with China's military. I think we can 
all agree that Americans should not be financing these 
businesses, which have a clear role in China's human rights 
abuses. Can you give a little more explanation as to how we 
close these gaps?
    Mr. Willems. Sure. Right now, there have been two Executive 
Orders that were issued, one by the Trump Administration, and 
then a subsequent one by the Biden Administration. And what 
they do is they say that the U.S. Government should identify 
companies that are affiliated with China's military, and then 
put prohibitions on investment. The problem with them and the 
gaps that are there is that those prohibitions only apply to 
publicly-traded securities. It does not apply to venture 
capital, private equity, debt, and other kinds of financing, 
and so I think Congress can step in to fill that gap.
    The other gap is that it only names two sectors within 
China, the technology surveillance sector and the defense 
material sector, and I think that there are probably other 
Chinese companies that pose a national security threat outside 
of those sectors that we need to look at, so that is the second 
gap I would look at filling.
    Mr. Steil. Thank you very much. I think we covered a lot 
here today. I think we looked at the opportunity to go on 
offense, which I think is absolutely essential. I think we need 
to return to the previous Administration's policies on that 
rather than some of the policies we are seeing coming out of 
this Administration. I think it is important we look at 
development banks like the World Bank, and, in particular, that 
we are not finding the United States of America in a position 
supporting the military of China. I yield back.
    I will pause. Ms. Garcia is recognized.
    Ms. Garcia. Yes, Mr. Chairman. I wanted to ask for 
unanimous consent to enter a document for the record, ``China's 
Engagement in Latin America: Views from the Region,'' by the 
United States Institute of Peace.
    Mr. Steil. Without objection, it is so ordered.
    Ms. Garcia. Thank you, Mr. Chairman.
    Mr. Steil. The Chair now recognizes the gentlewoman from 
Michigan, Ms. Tlaib, for 5 minutes.
    Ms. Tlaib. Thank you, Mr. Chairman. I would like to focus 
on the ways that foreign oligarchs can invest in U.S.-based 
assets to hide or launder illicit funds. I think the majority 
of foreign nationals investing in the U.S. are legitimate, and 
there is no national concern whatsoever in that regard. 
However, we know that there has been an incredibly, I think, 
easy way to establish anonymous trusts, shell companies in the 
United States which has made it easier for sanctioned citizens, 
and we saw it recently actually, and entities to hide their 
assets in the United States. I know the Administration, both 
the current one and the previous one, has supported, and I am 
sure you familiar with the Corporate Transparency Act of 2020, 
which is intended to prevent that kind of abuse of the shell 
companies, like the one used to hide ownership and control of 
U.S.-based real estate purchases that are sanctioned by folks 
who are Iranian, Chinese nationals, Russian nationals, a number 
of folks. So, this is something for the whole witness panel 
here.
    How important is it for the U.S. and allied nations to 
adopt transparency measures, like beneficial ownership 
registries, to prevent bad actors from abusing our open 
financial systems, because it is really about those resources 
and the money, as you all know. I can start with whomever would 
like to begin. I think, Eric, you had your hand up?
    Mr. Lorber. I am happy to take this one. I appreciate the 
question. The short answer is it is incredibly important. You 
have seen recently in publicly-announced actions, instances 
where sanctioned Russian oligarchs, for example, were able to 
park billions of dollars in trusts that were registered in 
Delaware for a period of, I think, 5 or 6 years. So, the 
Corporate Transparency Act and the related legislation were 
great work done by this Congress, and are important steps_
    Ms. Tlaib. Eric, for my residents, explain why, because 
this is the danger that I think they are not understanding. It 
is like, oh, they are just moving money for their own benefit, 
but it is actually a huge concern because this is how they can 
fund.
    Mr. Lorber. Sure. Yes, exactly. For example, pre-Corporate 
Transparency Act, an individual could go to a State, form a 
corporation, and then not be required to submit the natural 
persons who were the owners or the controllers of that 
corporation. So in theory, a Russian oligarch could go to a 
U.S. State, and form a corporation in somebody else's name. 
There would be no verification component, and they could 
subsequently funnel money through that shell company into U.S. 
assets, and it may be very, very difficult to detect. That was 
the issue that the Corporate Transparency Act, at a high level, 
was trying to solve. It is being implemented as we speak. 
Treasury is rolling out a series of rules to implement it, but 
that is sort of the core challenge.
    Ms. Tlaib. Anybody else? Mr. Harrell?
    Mr. Harrell. I agree very much with Eric that the Corporate 
Transparency Act was a huge first step. And the Treasury 
Department is in the process of getting IT and rolling out 
rules to uncover the beneficial owners of millions of 
companies. That is a big endeavor, and they need to make sure 
they have the resources to do it. I do think if Congress wants 
to continue looking at this issue, and I would encourage 
Congress to do so, looking at greater transparency around some 
of the enablers of corporate secrecy, the lawyers and the 
accountants, I think that is another good area to push on. And 
then the other thing, I would say_
    Ms. Tlaib. I was just thinking of that. I completely agree, 
because there are firms that are actually helping them do it, 
correct?
    Mr. Harrell. Yes.
    Ms. Tlaib. Yes.
    Mr. Harrell. The other thing I would say is, I think we 
have to get much more serious about transparency in some of the 
small tax havens. A few years ago, when this Congress was 
worried about the fact that overseas banks were helping wealthy 
Americans hide their taxes, there was a very meaningful effort 
to force banks in Switzerland and the Caymans and places like 
that to provide tax reporting information to the United States. 
There is not really a parallel requirement or serious effort to 
get places like the British Virgin Islands and the Cayman 
Islands to clean up their corporate ownership structures, and I 
think it is time to look at what can be done there.
    Ms. Tlaib. Thank you. And for many of my colleagues here, 
especially my Democratic colleagues who know that I have spoken 
about recently, just the impact of seeing somebody like Vincent 
Chin in our community in Detroit beaten to death after anti-
Asian hate rhetoric was increasing during that time, and we are 
seeing that again. So I just hope this committee can do this 
important work without fueling that rhetoric, being very, I 
think, thoughtful, so that we can do meaningful work, again, 
without jeopardizing our Asian neighbors across the country. 
But with that, I yield back.
    Mr. Steil. Thank you very much. Votes have been called on 
the House Floor. The Chair anticipates recognizing one more 
Member before we stand in recess for the votes.
    The Chair now recognizes the gentleman from South Carolina, 
Mr. Timmons, for 5 minutes.
    Mr. Timmons. Thank you, Mr. Chairman. This hearing is long 
overdue. I think we can all agree that China is a problem and 
that we need to figure out a solution utilizing all of our 
allies. This is not something that we can take on, on our own, 
but I will say that I have been pleased with a lot of the 
bipartisan agreement on a number of things today. One of them 
is that defaulting on our Federal debt is bad, and I think we 
all agree that we are not going to default. The question is, 
what steps do we take to regain some fiscal solvency?
    As the speaker says, if your kid runs up the credit card, 
you do pay it off, but you don't let him do it again. We have 
spent $7 trillion with the excuse of COVID, and that has 
increased our debt, but not only has it increased our debt, it 
has driven inflation, which is going to have long-term damage 
to our debt as well. So, we have to take steps to address that 
and to regain our fiscal solvency. It is a national security 
issue. It is perhaps the most preeminent national security 
issue, so I am hopeful that we will address our debt ceiling 
responsibly, reasonably, and sensibly, and I am confident that 
we are going to find our path forward. So, again, there is some 
bipartisan agreement we are not going to default.
    Another issue where I was actually surprised by some 
bipartisan agreement was that the Biden Administration handled 
the balloon poorly. I think the entire world was shocked, as we 
have talked about, a balloon for the last 4 days, and the 
disagreement has been largely partisan. But one of my 
colleagues across the aisle said that is why I was concerned, 
deeply concerned by this balloon business, and why the 
President allowed this balloon to go all over our country and 
not shoot it down. He did caveat it: ``I love the President. I 
support him, but this move not to blow down the balloon sends a 
powerful message to both enemies and friends because it is all 
about data intelligence and China got us on this one.'' So, we 
agree. China got us on this one. And the question is, what are 
we going to do to get China to reform their behavior, and 
compete in the global economy, and be good actors in the global 
economy? That is the question. And I am going to go to an issue 
that I think is a good case study on how to do that, and that 
is with 5G.
    Just a few years ago, Huawei, using the Belt and Road 
Initiative, was giving away next generation wireless 
infrastructure. They were going to our allies all over the 
world, and the FBI said, well, hold on now, that is not a good 
idea, and we didn't really want to explain why, but, 
ultimately, we did, and all of our allies now have either 
banned Huawei, stopped purchasing from Huawei, or required 5G 
to be secure. We have utilized the IMF and the World Bank 
through a bill that I sponsored 2 years ago to make it not 
possible for anyone to use the World Bank, the IMF, and it 
doesn't even address China. It just says if you are investing 
in unsecure 5G, you are not eligible for IMF or World Bank. So, 
I think that is a great example of a way that we can use our 
allies abroad to facilitate behavior change from China. Huawei 
has since taken steps to show that they are secure. They have 
not done a very good job. People do not believe them yet, but 
they are trying. They are trying to change their behavior.
    And I guess, Mr. Willems, I would just like to say that the 
type of situation where we can reform China's behavior because, 
again, China_I do not want them to be our enemy. I want them to 
be an equitable partner in the global economy, and they have to 
play by the rules. So, is this a good example of how we can 
accomplish that?
    Mr. Willems. I think it is a good example to talk about the 
importance of a comprehensive approach, because if you think 
about the way that we handled Huawei, it was the legislation 
that you talked about. But we also had export controls, we had 
investment restrictions, and now through the EXIM Bank, we are 
trying to provide 5G alternatives, and I think that shows what 
you need to do to successfully deal with China threats. You 
need to crack down, but then you also need to get on the 
offense and provide another alternative, and that is an 
approach I think we should apply to other areas as well.
    Mr. Timmons. Absolutely. Thank you. I am very concerned 
about our government's inability to adapt to the challenges 
that we are facing. And China has the ability to do whatever 
they want, whenever they want, and that is an advantage, but 
the control they have over their people is a disadvantage. 
Freedom and the American Dream is what makes this country so 
great, and I just hope that we can tackle this in a bipartisan 
manner going forward. And with that, Mr. Chairman, I yield 
back. Thank you.
    Mr. Steil. Thank you very much. As noted previously, votes 
have been called, two votes in total. Members are encouraged to 
return expeditiously following the second vote. Until then, 
this committee stands in recess.
    [recess]
    Chairman McHenry. The committee will come to order. I thank 
the panel for sticking with us. I will now recognize the 
gentleman from New York, Mr. Torres, for 5 minutes.
    Mr. Torres. Thank you, Mr. Chairman. I never thought this 
moment would come. According to an opinion piece by Ruchir 
Sharma in the Financial Times, if the United States economy 
would have grown at an average of 1.5 percent annually, and 
China's economy at an average of 2.5 percent annually, China 
would not overtake the United States until 2060, but even the 
assumption of a 2.5-percent growth rate seems increasingly 
questionable. As you know, China is confronting a perfect 
storm: a debt crisis; a demographic crisis; and a declining 
productivity crisis. So, I have an historical question for each 
of the panelists. Has there ever been a country in history that 
has grown at 2.5 percent annually in the face of productivity 
decline, population decline, and a prohibitive debt burden? I 
will start with Mr. Ashooh, and we will go down the row.
    Mr. Ashooh. I am not aware of one.
    Mr. Torres. Okay.
    Mr. Feddo. Nor am I, sir.
    Mr. Lorber. Not to my knowledge.
    Mr. Willems. It seems unlikely.
    Mr. Torres. Yes.
    Mr. Harrell. I'm not aware of one.
    Mr. Torres. So, America's greatest enemy is not the CCP. 
America's greatest enemy is itself. It is the dysfunction of 
our politics. There may be severe structural limits on China's 
ability to grow the Chinese economy, but there are no limits to 
America's ability to sabotage the American economy. Who needs 
the CCP when you have the self-sabotage of debt limit 
brinksmanship here in Washington, D.C.? The full faith and 
credit of the United States and the status of the dollar as the 
world's reserve currency formed the foundation for American 
leadership in the world, the very American leadership that the 
Chinese Communist Party is intent on overturning. And I have a 
simple yes-or-no question. If the Federal Government were to 
breach the debt limit beyond the ``X'' date, would damaging the 
full faith and credit of the United States undermine the 
competitive position of the United States relative to the CCP? 
And we will start with Mr. Ashooh.
    Mr. Ashooh. Yes.
    Mr. Feddo. Yes.
    Mr. Lorber. I think that is likely.
    Mr. Willems. I agree.
    Mr. Harrell. Yes.
    Mr. Torres. As you know, more than 6 years ago we saw 
Russia weaponize social media platforms like Facebook and 
Twitter to interfere with the 2016 election and otherwise 
conduct influence operations against the United States. The CCP 
has infinitely more influence over TikTok than Russia has over 
Facebook and Instagram. TikTok is or could easily metastasize 
into a Trojan horse for a CCP influence operation against the 
United States. A question to each of you is, do you think 
TikTok should be banned from the United States?
    Mr. Ashooh. I really can't answer that. We did look at this 
when I was in government, and there are clearly issues there 
about what to do about it. An outright ban may not be the 
answer, but clearly_
    Mr. Torres. Are you aware that the parent company of TikTok 
is a CCP committee?
    Mr. Ashooh. Most Chinese companies have some sort of 
Chinese government influence.
    Mr. Torres. And is that cause for alarm?
    Mr. Ashooh. Of course, it is. Absolutely.
    Mr. Torres. Right, and as you know_
    Mr. Ashooh. Let me clear. I can't give you a yes or a no 
because I want the solution to fit the problem, and I don't 
have enough information.
    Mr. Torres. Let me rephrase the question differently. 
TikTok is not only a social media platform, it has become a 
leading new source for the next generation of Americans, our 
most impressionable minds. Is it in the strategic interest of 
the United States to have the CCP shape the information 
environment of the United States?
    Mr. Ashooh. Again, sir, this is an important issue. We did 
look at it when I was in government, finding the right answer 
in a way that didn't run afoul of concerns such as the First 
Amendment and other things that came up. Just because it didn't 
work, the First Amendment, doesn't mean we don't need an 
answer. Here, we do. I just don't know what it is. And I am out 
of government, so I unfortunately_
    Mr. Torres. Mr. Feddo, should we ban TikTok? And I have 
nothing against dancing, for the record.
    Mr. Feddo. I worry about the idea of banning because it can 
become a slippery slope. Also, attempting to ban TikTok failed 
during the Trump Administration, which is the President's 
Executive Order in August of 2020. I think you are right. The 
concerns about its parent company_the Commerce Department at 
the time had supporting information related to its attempt to 
enforce the ban that there were 130 CCP committee members 
within the parent company that had been_
    Mr. Torres. What was the number?
    Mr. Feddo. 130.
    Mr. Torres. So, 130 former CCP members in the parent 
company.
    Mr. Feddo. And National Security Advisor O'Brien, President 
Trump's National Security Advisor, has called it the worst own 
goal in national security and a scandal_
    Mr. Torres. I just want to quickly get yes-or-no answers. 
Mr. Lorber? Mr. Willems? Mr. Harrell?
    Mr. Lorber. I don't think it lends itself to just a simple 
yes or no.
    Mr. Torres. Okay.
    Mr. Lorber. There are all sorts of factors.
    Mr. Willems. I think we should put in place a broader 
infrastructure to examine all Chinese apps operated in the 
United States and make sure that we are protecting against 
national security threats because I don't think it is just 
TikTok.
    Mr. Torres. Fair enough.
    Mr. Harrell. Yes, I agree with Clete.
    Mr. Torres. Okay. Thank you. My time has expired.
    Chairman McHenry. I will now recognize Mr. Meuser of 
Pennsylvania for 5 minutes.
    Mr. Meuser. Thank you very much, Mr. Chairman. And 
certainly, I thank all of our witnesses for your time here 
today.
    China is characterized in many different ways_a competitor, 
rival, authoritarian, adversary_and I guess we will see over 
the years what it will be characterized as by us moving 
forward. But right now, the CCP, among many things, is accused 
of, and there is much evidence to support, the regular theft of 
intellectual property. Recently, the FBI Director stated that 
the Chinese government poses the biggest long-term threat to 
our economy and the national security of the U.S., of course. 
He described a lawless, stop-at-nothing Chinese government 
agenda to steal IP. Mr. Ashooh, in your judgment, is the Biden 
Administration treating this as seriously as we should be?
    Mr. Ashooh. The issue of IP theft?
    Mr. Meuser. Yes.
    Mr. Ashooh. I believe so. I believe it certainly had 
attention in the prior Administration, and I haven't seen that 
wane. The challenge is, it is a very hard problem to solve 
because the institutions to deal with it are in the law 
enforcement realm, and once that IP has been prolonged, it is 
not like you can just discourage it, so it is a very 
challenging problem.
    Mr. Meuser. I was in business for a long time on an 
international basis, and I can appreciate that, but is it 
something that our State Department or others are regularly 
commenting on and pushing back on and trying to investigate, to 
your knowledge?
    Mr. Ashooh. I can't speak specifically to a particular 
agency. I certainly know it was a priority when I was 
regulating.
    Mr. Meuser. Okay. Mr. Feddo, is the Biden Administration's 
assault on our domestic energy industry, excessive spending 
that took place over the last several years, which is the 
primary cause of inflation, higher interest rates, and the loss 
of much wealth in the capital markets, along with the raising 
of business taxes, which has been done, and a lot of talk of 
raising taxes higher in the near term on U.S. companies_does 
this improve our position vis-a-vis China, and does it improve 
the economic competitiveness of the United States, in your 
view?
    Mr. Feddo. I don't think it does. I am probably not the 
best to answer that with more precision. If I can just 
interject on your question to Mr. Ashooh, I do think that FBI 
Director Wray is constantly talking about intellectual property 
theft, and the FBI, as he said, is opening up an investigation 
related to espionage and IP theft every 12 hours, and there are 
over 2,000 investigations. So, I do think the Justice 
Department is very focused on that issue.
    Mr. Meuser. Mr. Lorber, do you think the idea of raising 
our corporate income tax from 21 percent, which has made us 
competitive sort of in the middle of the pack of industrialized 
nations_do you think the idea of raising that will help or hurt 
our economy vis-a-vis China's output?
    Mr. Lorber. I can't speak specifically to the raising of 
the corporate minimum tax, but I will say that anything we do 
that hurts the competitiveness of U.S. companies would hurt the 
U.S. national security vis-a-vis_
    Mr. Meuser. Yes, Made in the U.S. makes it more difficult. 
Mr. Willems, your thoughts on that?
    Mr. Willems. We should not raise the corporate tax.
    Mr. Meuser. Right. Something else I want to bring up is I 
have a bill, H.R. 839, known as the China Exchange Rate 
Transparency Act. And what this bill does is it requires the 
Treasury to instruct the U.S. executive director at the IMF to 
use the voice and vote of the United States to advocate for 
increased transparency from the PRC's exchange rate practices 
compliance by the PRC in line with what other members of IMF 
are beholden to, and publication of significant divergences, 
and stronger consideration by the IMF management, and members 
of PRC's lack of transparency when evaluating quota and voting 
shares at the IMF. Would you just comment if you think such a 
bill makes sense, Mr. Willems?
    Mr. Willems. I think that this is the right approach. This 
is an issue the committee should be focused on. I think one 
thing that committee should explore in greater depth is 
enforcement mechanisms around these IMF proposals. What are the 
sources of leverage we can use to actually effectuate these 
policy changes? And I do think it is helpful to instruct the 
U.S. representative at the IMF to take these positions, but how 
are we actually going to get results? I think I would like to 
start with your bill, and then let's build off of it and figure 
out how to make it actually happen.
    Mr. Meuser. Sure. Great. Anybody else? I only have 8 
seconds.
    [No response.]
    Mr. Meuser. Good. Mr. Chairman, I yield back. Thank you.
    Mr. Lawler. [presiding]. The gentleman's time has expired. 
The gentlelady from Colorado, Ms. Pettersen, is recognized for 
5 minutes.
    Ms. Pettersen. Thank you, Mr. Chairman, and thank you all 
for being with us today. I know it has been a long day, so 
thanks for sticking it out.
    I know that we are focused on the economic threats of 
China, and something that isn't necessarily part of this, but I 
think that I want to talk about are some economic tools you 
might recommend on how to address the threat that we face from 
China with the illicit drug market and the increase in fentanyl 
coming into our country. This has hit Colorado hard. This is 
happening globally. And while I know that you are not all here 
today as experts in the illicit movement of drugs and drug 
proceeds, I just want to know if you have recommendations for 
economic tools, carrots and sticks, that Congress might be able 
to employ to actually change behavior here. This is something 
that has killed more people in the United States than all of 
the world wars combined, the opioid epidemic. It is the third 
wave, and fentanyl has completely taken over the drug supply 
chain, and it is incredibly dangerous. So, I would love to hear 
your thoughts.
    Mr. Lorber. Sure. I am happy to take the first crack at a 
response. As I mentioned earlier, we have seen the Treasury 
Department target a number of Chinese individuals and entities 
for their role in illicit fentanyl production and smuggling. 
One other approach that I have seen as a complement to 
sanctions authorities that has worked, I think, fairly well 
over the last few years, has been guidance and advisories that 
have been promulgated either by the Financial Crimes 
Enforcement Network (FinCEN), OFAC, or other entities in the 
U.S. Government that highlight what the typologies of illicit 
funds movements associate with a particular threatening 
activity could be, in this case, fentanyl trafficking, 
something along those lines. If you wanted to think about how 
you could expand the toolkit beyond simply sanctions and law 
enforcement as of right now, that might be something to 
consider.
    Ms. Pettersen. I appreciate that. Thank you so much. I 
yield back.
    Mr. Lawler. The gentlewoman yields back. The gentleman from 
Wisconsin, Mr. Fitzgerald, is recognized for 5 minutes.
    Mr. Fitzgerald. Mr. Willems, one of our major priorities as 
a committee is to prevent malign influence by China that would 
distort our markets. Last Congress, I was fortunate enough to 
author a bill, the Foreign Merger Subsidy Disclosure Act, and 
it was signed into law by the President. It put an emphasis on 
disclosure, sunshine, that type of thing. The FTC and the 
Department of Justice, the Antitrust Division, are now required 
to monitor and take foreign government subsidies into account 
in the pre-merger notification process, another area where 
China is attempting to infiltrate our exchange trade funds 
traded here in the United States as well.
    Many of these investment vehicles contain Chinese companies 
involved with China's military as well. That has been 
disclosed. I think there was even some discussion about it 
today. For example, CSSC Holdings Limited, China's largest 
builder of military ships, is listed in several major indices, 
including MSCI emerging and FTSE as well. So, there are a 
number of different corporations that are complicated acronyms 
as part of this discussion. The indices contain trillions of 
dollars of assets under global management, and current law that 
prohibits U.S. investors from buying or selling securities for 
companies deemed to support China's military. However, parent 
companies or subsidiaries of listed companies can still be 
found in these indices. Why is it that the parent and 
subsidiaries of listed companies can circumvent this ban? We 
still don't have a full answer to that.
    One of the other principles I hope we keep in mind as we 
look at ways to counter China is to ensure that these policies 
do not wink at the dominance of the U.S. dollar here and 
abroad. We have seen that many of these adversaries like China, 
Iran, and Russia have made efforts to reduce the reliance on 
the dollar, but even some of our allies who have sought to work 
around our sanctions are well aware of it. And I think it goes 
beyond bad actors at this point, and they are trying to 
establish alternatives to our SWIFT system. So my question to 
you would be, are there things we should be doing, in addition 
to what we tackled in the last Congress, that could probably 
tighten this and make it more presentable to not just 
congressional committees, but also to DOD and anybody else 
involved in the defense industry?
    Mr. Willems. First, let me say congratulations on your 
bill.
    Mr. Fitzgerald. Yes, thank you.
    Mr. Willems. I think that it's a good piece of legislation 
and I'm glad that it was signed into law. Second, let me 
comment on the military company restrictions, which you 
referred to. I think that Congressman Barr has legislation that 
is looking to make this statutory and then tighten some of the 
gap, and I think that as we are doing it, considering what you 
raised is also a worthwhile endeavor for this committee to 
explore.
    Now, I think that there may be some complexities we need to 
think about when you are talking about entire index funds, but 
the point is, if we make a determination that a company is 
linked to the Chinese military, we shouldn't have U.S. 
investors in that company. So, we need to figure out how we are 
closing all applicable gaps, and I think exploring what you 
raised is a worthwhile endeavor.
    On the SWIFT question, that is less my area of expertise, 
but I would be happy to try to get back to you on that or maybe 
one of my colleagues also has something to say. And I was 
looking at Eric.
    Mr. Lorber. I am happy to touch on the SWIFT.
    Mr. Fitzgerald. Mr. Lorber, yes, do you have a comment on 
the SWIFT part of it?
    Mr. Lorber. Yes, definitely. I do think that to a certain 
extent, and as we talked about previously, there are 
workarounds that are under development or have been developed 
by our adversaries. China, we talked about with the potential 
CBDC, as well as Russia and their Mir payment system. On the 
SWIFT side, I actually think that the threat of a sort of a 
European defection from the U.S.-led financial rail system may 
not be as immediate as some were worried about even a few years 
ago. Remember, the Europeans set up Instex following the U.S. 
withdrawal from the Joint Comprehensive Plan of Action (JCPOA) 
as a way to facilitate trade with Iran that was outside the 
U.S. sanctions jurisdiction. I think there was one transaction 
that ended up going through Instex. Very, very few did. And so, 
I think to a certain extent, there was a lot to talk about at 
the time, but in actuality, it didn't come to fruition, and I 
certainly haven't heard of anything along those lines since the 
Russian invasion of Ukraine.
    Mr. Lawler. The gentleman's time has expired. The Chair now 
recognizes the gentlewoman from Massachusetts, Ms. Pressley, 
for 5 minutes.
    Ms. Pressley. Thank you. First, I just want to take a 
moment to condemn the anti-Asian rhetoric by many of our 
colleagues in Congress across the aisle, which has emboldened 
anti-Asian hate, not only in the Massachusetts 7th, which I 
represent, leaving many of my constituents in fear with their 
safety threatened, but really threatened our democracy. And I 
want to just take a moment to forcefully disassociate myself 
from remarks made by my colleagues that peddle xenophobia and 
fuel violence against the Asian community. I do think we can 
certainly be critical of the Chinese government and their 
economic policies without being hateful, racist, or xenophobic 
in our language.
    So, Mr. Harrell, you are the former Senior Director for 
International Economics and Competitiveness with experience on 
the National Security Council and the National Economic 
Council. Do you agree that it is possible to talk about China's 
policies without being racist or xenophobic?
    Mr. Harrell. I think it is very important that we be 
thoughtful in how we talk about and how we discuss the 
challenges we face from China. It has been heartening here 
today with this committee to hear several members of the 
committee note that when we talk about our competition with 
China and the threat from China, we are talking about the 
Chinese Communist Party and the Chinese government, and we are 
not talking about the hundreds of millions of ordinary Chinese 
people with whom we have a lot in common at a personal level. I 
do think it is important that we continue to be careful about 
how we talk about this in a politically-charged atmosphere, to 
make sure that we are clear that we are talking about 
government policies in China, the acts of the state, and that 
we are not inadvertently kind of sliding into statements 
against the Chinese people.
    Ms. Pressley. Thank you. I hope that my colleagues hear you 
loud and clear and can learn from that. I also hope they learn 
to discuss global competitiveness without warmongering. It is 
no surprise that proponents of the military-industrial complex 
have already seized on recent events to call for even more 
defense spending. War should not be the centerpiece of U.S. 
foreign policy. In today's hearing, let me say that war will 
not solve our global economic challenges. Rather, the United 
States can demonstrate global leadership by building 
partnerships grounded in economic policies that center on human 
rights, invest in workers, and form lasting relationships. This 
is how we achieve our goals on the global stage and distinguish 
our approach from Chinese policies.
    I am particularly interested in the U.S. economic approach 
to the African continent. Africa is a rapidly-evolving 
continent. In 2019, 7 of the 10 fastest-growing economies in 
the world were in African countries and the Continent's 
population is expected to double to 2.5 billion people by 2050.
    Mr. Harrell, can you describe some of the key lessons we 
should learn from Chinese policies and economic investments in 
African countries?
    Mr. Harrell. I think it is incredibly important that we as 
the United States up our game with respect to engagement in 
Africa. I think there have been a couple of very positive steps 
over the last couple of months. I think President Biden's 
African Leaders Summit provides a useful foundation to renew 
diplomacy and economic engagement across the continent. I think 
trips like Secretary Yellen's and Secretary Blinken's recent 
trips to the continent help build on that foundation to deepen 
ties. I do think that the Biden Administration is potentially 
further along in its thinking with IPEF and with APEF 
initiatives for the Indonesia-Pacific and for the Americas 
Partnership than it has been on some of the specific economic 
deliverables and initiatives for the African continent. But I 
am also confident coming out of the African Leaders Summit that 
we are going to see more robust engagement.
    I do think we are well-positioned for renewed engagement in 
Africa because the shine has really come off of the kind of 
Chinese debt diplomacy of the last decade in China. We are 
seeing countries in Africa and elsewhere, but particularly in 
Africa, see some of the downsides of letting Chinese companies 
come in with low standards for mining, for manufacturing, for 
the environment, for labor, and for human rights. And so, you 
are beginning to see African governments put a pause on Chinese 
projects.
    Ms. Pressley. I am almost out of time. Thank you so much. I 
do strongly believe the U.S. has an opportunity to be a fair 
economic partner with African nations and to foster a global 
economy that truly works for all. Thank you.
    Mr. Lawler. The gentlelady's time has expired. The 
gentleman from New York, Mr. Garbarino, is recognized for 5 
minutes.
    Mr. Garbarino. Thank you, Mr. Chairman. And thank you all 
for being here all day today. I appreciate it.
    Mr. Willems, I have a question for you. The Asian 
Development Bank (ADB) is probably the most important 
development institution in the Asia-Pacific region addressing 
regional development problems using financing in the form of 
grants, loans, and advisory services. However, beginning in 
2014 with the New Development Bank, and in 2016 with the Asian 
Infrastructure Investment Bank (AAIB), China has created its 
own rival banks, while still itself getting loans from the 
Asian Development Bank. I believe China received the second-
largest amount, counting for 14 percent of the bank's 
outstanding loans. There have been discussions with the Asian 
Development Bank about possibly stopping loans to China, 
because even though China likes to say it is a developing 
country, we don't think it is anymore, but they haven't made a 
final decision. Do you think China should still receive or 
should stop receiving loans from the Asian Development Bank, 
and what advantages does China get by continuing to receive 
these loans?
    Mr. Willems. Thank you for the question, and I agree. I 
think China should not receive loans from either the World Bank 
or the Asian Development Bank. And I don't have it in front of 
me, but if you look at the World Bank's Articles of Agreement, 
it talks about how the countries that should receive loans are 
those that don't have liquidity themselves. So, what you have 
here is China getting the loans instead of those who actually 
need it. And I think in both of those institutions, we need to 
try to work with allies to create a situation where China is no 
longer getting loans, because if they can do Belt and Road, if 
they can do the AIIB, they clearly don't need the ADB or the 
World Bank.
    Mr. Garbarino. Exactly, and I love your saying that they 
are taking 14 percent of the pot of money here that could be 
going to other people. You just mentioned Belt and Road, and I 
guess that has been around for what, 2 decades or so. And I 
think the estimates last pegged China's lending to the world at 
a trillion dollars. I think it was the last estimates in the 
last couple of years, which would make them bigger than the 
World Bank and the IMF. And these loans that they are giving 
out to these developing countries are usually shorter-term, 
higher-interest-rate loans. And we are seeing now Pakistan said 
it wants to renegotiate Belt and Road Initiative payments, 
accusing Chinese companies of inflating the cost of 
construction by $3 billion.
    Laos, Sri Lanka, and I think some other African nations 
have asked to restructure and delay repayments or forgive 
billions of dollars because of the high interest rates and 
everybody coming out of the pandemic because of what these 
loans that China has done through the Belt and Road Initiative, 
and now these developing countries are being harmed even worse 
than they thought they were going to be. What role should we 
and other international financial institutions have in 
addressing the needs of these developing countries that receive 
funds from the Belt and Road Initiative and now are in need of 
debt relief?
    Mr. Willems. Yes, so two comments on this. The first is, 
the hypocrisy from China is thick, right? China goes around and 
says it is the defender of the multilateral system and it is a 
responsible international stakeholder, yet it is the outlier in 
refusing to restructure these debts. And so, I do think we need 
to work with allies to pressure China to change its position.
    The second point I would make is we need to help prevent 
these countries from getting in that position in the first 
place. And one of the issues that I think we need to focus even 
more on is our development tools, the DFC and others, in 
figuring out how to provide a robust alternative to China so 
that these countries aren't taking Belt and Road money to begin 
with.
    Mr. Garbarino. Okay. But we have to make sure that the 
taxpayers are bailing out these bad loans.
    Mr. Willems. I agree.
    Mr. Garbarino. Okay. I just want to make sure, because I 
don't know if the IMF, or the World Bank are coming in and 
renegotiating these loans, which is going to work, but what 
kind of pressure can we put on Beijing to make them do it?
    Mr. Willems. I think one of the things we want to do is 
work with G7 partners. The United States alone doesn't have the 
voting shares in either of these institutions to be able to 
leverage change itself. It needs partners, so we need to get 
those partners who have enough voting shares to actually make a 
difference. We need all of them to band together, get on the 
same page, and pressure China, and that is the best way to do 
it, in my opinion.
    Mr. Garbarino. I appreciate those answers, and I am out of 
time, so I yield back. Thank you very much.
    Mr. Lawler. The gentleman yields back.
    The gentleman from Nevada, Mr. Horsford, is recognized for 
5 minutes.
    Mr. Horsford. Thank you. I want to thank the chairman and 
the ranking member for holding this necessary hearing today, 
and I want to thank our expert witnesses for appearing before 
the committee. I am glad that you are here to elaborate on the 
various ways that the Chinese Communist Party is challenging 
the United States interest on a global scale, whether it be 
through unfair trade practices and ignoring of international 
sanctions, undermining of the SWIFT banking system, expansion 
of influence through the Belt and Road Initiative, or simply 
military aggression.
    We are seeing a multifaceted campaign from Beijing to 
catapult China to the forefront of global markets and the world 
stage. We have a responsibility to our children and to the next 
generation to own the 21st Century as the United States. No 
longer do we have the luxury of waiting for tomorrow, as we are 
locked in a competition for America's global standing today. 
So, the work that we do here and have done over the last 2 
years will be key to position our country for the economic 
fight to come. I am proud to say that House Democrats have 
delivered and laid the groundwork for American success through 
strategic investment in our people, our production, and our 
infrastructure.
    The CHIPS and Science Act ensures that the technology of 
the future will be made right here in America, by union members 
with good, quality jobs. And as the high-tech manufacturing 
sector evolves, our production capabilities will grow right 
along with it. However, other investments were necessary to 
rebuild our crumbling roads and bridges through the Bipartisan 
Infrastructure law, which will allow American businesses to 
bring their goods to the market faster and at a lower rate. 
Meanwhile, the Inflation Reduction Act delivered support to the 
nearly 60,000 manufacturing employees back in my home State of 
Nevada, while ensuring that the United States will lead the way 
forward on clean energy.
    Now, these are just some of the examples, and I know my 
colleagues on the other side will propose additional ones, and 
I hope to work with many of you on those efforts, but I believe 
that we should be focused on also supporting and investing in 
American companies and the American workforce. For decades, 
investments in manufacturing and our supply chains had to be 
offshore to China by multinational corporations that saw 
opportunities for ever greater returns. I am particularly 
worried by the large investments from the Thrift Savings Plan 
and other retirement accounts in the companies controlled by 
the Chinese Communist Party.
    Nevadans don't need to have their retirement accounts, 
investing their hard-earned money into companies and funds that 
are actively competing against us. While I applaud President 
Biden for his recent Executive Order barring investments in 
certain military or surveillance companies, it remains that 
U.S. investors hold over $1.2 trillion in equity and debt 
issued by Chinese entities. These investments should be made 
here at home to the benefit of American companies, communities, 
and workers. To make matters worse, while the companies that 
American firms have invested in may appear to be privately 
held, oftentimes, they are still working at the behest of the 
Chinese Communist Party.
    Mr. Harrell, given all that we know about the difficulty in 
disentangling Chinese state-owned enterprise from private 
firms, do you think it is appropriate for the Administration 
and Congress to consider further trade restrictions on American 
investment in Chinese firms? Are we essentially shifting money 
away from our domestic sectors to the benefit of our 
competitors?
    Mr. Harrell. I do think it is appropriate for Congress and 
for the Biden Administration to look at ways to expand limits 
on certain U.S. investments in China. I would recommend, in 
particular, that the Administration and Congress work to build 
out the list of Chinese military and surveillance companies 
where investment is currently prohibited to potentially include 
other kinds of companies where we see specific national 
security risks from the investment in those companies. And I 
also joined several of my colleagues here in endorsing a 
narrowly-targeted review mechanism for certain outbound private 
investments in China. I do think it is important to look at 
both of these issues.
    Mr. Horsford. Thank you very much. Mr. Chairman, and Madam 
Ranking Member, I will yield back.
    Mr. Lawler. The gentleman yields back. The gentlewoman from 
California, Mrs. Kim, is recognized for 5 minutes.
    Mrs. Kim. Thank you, Mr. Chairman. And I want to really 
thank the witnesses. You are the experts in this field, and I 
think it is such a timely hearing on the topic of how we 
discuss the economic challenges posed by the CCP.
    As you know, it is no secret that the CCP, under the 
authoritarian regime of Xi Jinping, are trying to displace the 
United States as the number-one economy in the world and have 
countered the American Dream with the CCP's version of the 
China dream on the global stage. I am an immigrant who came 
here to live that American Dream, and I can't tolerate seeing 
that eroding every year by the CCP, which is why, when we see 
the CCP strategically undermining U.S. interests and 
threatening U.S. economic and commercial interests abroad at 
every turn, we have to do everything we can to come up with 
policies that will counter it. We just saw in the last week 
that the CCP is not satisfied with threatening U.S. economic 
and commercial interests abroad. It has also sought to violate 
our domestic airspace and the longstanding international norms 
with surveillance balloons. So clearly, we need to get CCP and 
Xi Jinping and their reckless actions tamed.
    Let me ask you, Mr. Lorber, the CCP has opted to increase 
its bilateral swap line agreements to further internationalize 
its currency, and rival the U.S. dollar as the world's reserve 
currency. As in the case of Russia, these bilateral swap lines 
are being used to circumvent the U.S. dollar and sanctions. Can 
you talk about the policies that the U.S. can implement to 
flatten or reduce bilateral swap line agreements between the 
CCP and other countries?
    Mr. Lorber. Thanks. It is a great question, and I think 
there are two responses to it. The first response is, in any 
situation, including like this, where there is a national 
security threat or potential illicit activity occurring, that 
is a prime candidate for the use of a targeted sanction. So, 
that definitely does exist in this scenario.
    I think the second point, though, is that part of the 
reason that it has been challenging, as I understand it, for 
China to internationalize many of its financial relationships 
and have adoption, widespread adoption of currency as the 
renminbi itself has certain core limitations to it, so a degree 
of exchange rate volatility, capital controls that exist. And I 
think the second point I would make is that there is always a 
distinct possibility and maybe even a probability that the 
expansion of the swap lines may not occur because of the 
limitations of the renminbi.
    Mrs. Kim. Thank you. Mr. Willems, I have a question for 
you. The COVID-19 pandemic and the CCP's COVID Zero policy 
showed that critical supply chains and international commerce 
cannot be subject to the whims of an authoritarian regime that 
disregards the basic economic norms. So, can you describe any 
policy recommendations that will help us move the critical 
supply chains away from China, and as a follow-up, your 
thoughts on re-engaging Indo-Pacific partners and allies with 
our trade agreements?
    Mr. Willems. I completely agree with your premise, and I do 
think that is a lesson from the pandemic. I think that we do 
need to figure out, can we reduce supply chain reliance on 
China? Now, I think one unfortunate circumstance has been that 
this Administration has not been pushing for the right policies 
to do that. And one of the things that I would like to see much 
more of that I think can be more effective are trade 
agreements.
    To put it simply, if we want our companies to leave China, 
we need to provide them with positive incentives and other 
markets to go to, so we need to make it easier to link our 
supply chains with these other countries. And I would like to 
see more trade agreements in particular, in the Indonesia-
Pacific, Taiwan would be a top candidate for me, and then I 
would also look at renegotiating the TPP, trying to fix it and 
make it work for U.S. interests.
    Mrs. Kim. Great. Thank you. We agree on that. I have one 
more question for you, Mr. Willems. I have been an advocate for 
the United States to provide Taiwan membership in the 
international organizations, and I have done that in the first 
term that I served. And just recently, I introduced H.R. 540, 
the Taiwan Non-Discrimination Act, to allow Taiwan to be 
included in the international monetary policy. So, I want to 
get your take on that, and can you describe how getting Taiwan 
into the IMF, for example, could strengthen the IMF and other 
international organizations?
    Mr. Willems. I have 5 seconds, but I will strongly endorse 
your bill, and I do think Taiwan is already a member of many 
organizations_
    Mr. Lawler. The gentlelady's time has expired. Please 
submit your responses for the record.
    Mrs. Kim. I heard what I needed to hear. Thank you so much 
for your endorsement of my bill. I yield back.
    Mr. Lawler. The gentleman from Nebraska, Mr. Flood, is 
recognized for 5 minutes.
    Mr. Flood. Thank you, Mr. Chairman. And thank you to all of 
the witnesses who are here.
    In 2017, the People's Republic of China announced with glee 
that they were going to be giving us $100 million to build a 
garden in our national park here in Washington, D.C. It turns 
out that they wanted to collect intelligence. They wanted to 
find out what was happening in our Nation's Capital, and they 
have been doing this all over the country.
    As a Representative from Nebraska, I represent Offutt Air 
Force Base, which is home to the U.S. Strategic Command 
(STRATCOM). We also, as many of you know, have a very close 
connection to our nuclear triad, and we have sensitive military 
assets all over the State of Nebraska. And I found out that 
cell phone companies, some of them owned by American companies, 
are providing cellular services using Huawei equipment. On top 
of this, folks in North Dakota and several rural States are 
raising the red flag about the Chinese government purchasing 
real estate in the United States.
    My question is for Mr. Feddo. During your time working at 
the Treasury, can you speak to how frequently Chinese real 
estate purchases came under CFIUS review? Was it frequent or 
infrequent?
    Mr. Feddo. Thank you very much for the question, Mr. Flood. 
We implemented the rule. We had a statutory deadline on 
February 13, 2020 and we implemented regulations, which made 
real estate jurisdiction effective at that time. Real estate 
filings are voluntary. They are not a mandatory filing, but the 
committee has the power to pull in filings that it deems 
deserve scrutiny under its jurisdiction.
    Oftentimes, real estate transaction jurisdiction overlaps 
with the normal jurisdiction of the committee, and so it is 
hard to say which ones might be real estate-related 
transactions. But the concern about proximity, which you are 
describing, is something that the committee and its members, 
especially the member agencies, the Justice Department and the 
FBI, in particular, are very concerned about and very alert to, 
so that piece is addressed.
    There is a list of almost 200 military installations and 
other facilities that are published by the committee that 
relate to real estate jurisdiction. And those are provided by 
the agencies within the committee that have the subject matter 
expertise to say this facility is sensitive and should be 
within the real estate jurisdiction of the committee. And so, 
to the extent there is a facility or installation, that is not 
in there, that is on the committee and its member agencies to 
dialogue and tweak it so that there is appropriate coverage for 
something that is sensitive.
    Mr. Flood. It seems to me like Congress needs to take this 
very seriously, maybe make it mandatory that the reporting 
happen. And as I read the regulations now, in the case of the 
Chinese garden that was roughly 2.7 miles away from the U.S. 
Capitol, and 4 miles away from the White House, yet CFIUS' 
jurisdiction is defined as 1 mile from the base. It seems to me 
that we could be making some changes in the way our statute 
reads so that we are requiring a better look at some of these 
concerns.
    Mr. Feddo. Maybe I would say that the full committee and 
all the member agencies, including DOD and those that have a 
stake in this issue of proximity, and spying, and collection 
ofintelligence_we were all very involved for 2 years in scoping 
this out. And one concern I would have, and as you consider 
what to do going forward, is to the extent real estate 
jurisdiction is scoped so broadly, it may consume everything 
that CFIUS does, and sort of make it limitless.
    Mr. Flood. And I do appreciate your concern there, because 
I think we can draw this in such a way that it draws everybody 
into a circle and we could waste some government resources. Do 
you feel confident that CFIUS' current review process gives us 
the ability to police what I think a lot of folks in North 
Dakota, and Nebraska, and other communities are saying about 
the CCP's efforts in real estate?
    Mr. Feddo. I do, to the extent that it is a clear national 
security issue related to a U.S. business or to an installation 
or to something that gives it a hook. If it is more of a raw 
real estate transaction, that may be another question for 
another authority within the government.
    Mr. Lawler. The gentleman's time has expired.
    Mr. Flood. I yield back.
    Mr. Lawler. The gentleman from Iowa, Mr. Nunn, is 
recognized for 5 minutes.
    Mr. Nunn. Thank you, Mr. Chairman. And thank you very much 
to the panel for being here. You are all experts on China, the 
threat emerging from China.
    As we look at things, as a counterintelligence officer 
myself, who protects our national security, as somebody who has 
flown recon operations in international airspace, not violating 
another country's sovereign airspace territory has been seen in 
recent days. We have a real concern here, and I think one of 
the greatest threats to U.S. national security in relationship 
to China right now is not on the battlefield, but it is in that 
area where a great transfer of U.S. wealth is going to build 
the Chinese economy, whether that is state-owned businesses, 
whether that is their foreign investment infrastructure done 
with American credit, or whether that is the actual buildup of 
the People's Liberation Army.
    With this, Mr. Willems, you have highlighted firsthand how 
export controls, restrictions, and subsidies received by China 
on the global stage are becoming a threat. One of the things I 
would like to learn, first of all, before we get to a situation 
of a kinetic conflict between the United States and China is, 
how can we provide an offramp for China to do right by the 
United States and themselves, as well as U.S. companies really 
leading in this space, to have good behavior that is going to 
reward America and not allow China to continue to take 
advantage of us?
    Mr. Willems. I think what I would start with is the need to 
bifurcate the kinds of activity that we have with China. On one 
hand, there are things that can clearly contribute to their 
military development, that can raise national security threats, 
and we need to crack down on that kind of behavior. On the 
other hand, we want to maintain linkages with China where we 
can. And I think there has been a lot of conversation today 
about distinguishing between the PRC and the Chinese people, 
and it is important to maintain that distinction, and it is 
important for us to have our companies engaging directly with 
the Chinese people themselves.
    And I think, as someone from Iowa, having more exports into 
China is good. It helps Iowa farmers. I also think, looking at 
our financial services industry, that they need to be on the 
ground in China, to do business in China and to be globally 
competitive. So, let's maintain those links while cracking down 
on the ones that are problematic.
    Mr. Nunn. As far as I know, you have hit the point, head 
on. One of the bills that I am looking at introducing here is 
the Neutralizing Unfair Chinese Subsidies Act of 2023. What 
this really looks to do is to identify the way in which the 
Treasury Secretary could develop a strategic plan today and a 
timeline to work with our allies in order to seek China's 
compliance with international export subsidy standards. This 
goes to both a multilateral_which you have spoken to_approach 
with our allies, as well as very targeted bilateral pressure 
towards China. So, the follow-up question here is, what levers 
would you recommend the Administration utilize, maybe those 
levers that are not being utilized, and how can we move forward 
with this in a pragmatic way?
    Mr. Willems. I like where your legislation is going, and, I 
will say, I think it is part of a broader approach. On one 
hand, we do want to engage with the OECD and enforce these 
rules against China, and I think we should talk about how to do 
that, how to work with allies and partners to put that pressure 
on China. At the same time, we don't want to race to the bottom 
with China, but we do have an export credit agency, EXIM Bank, 
that can provide an alternative to what China is doing.
    I had a couple of recommendations earlier today on how to 
loosen some of the strings around EXIM so we can provide a 
meaningful alternative, things like having their China & 
Transformational Exports Program that cuts through red tape, 
things like allowing them to take a little bit greater risk to 
make sure that we are actually in the same level playing field 
as China.
    Mr. Nunn. Excellent. Mr. Willems, I would echo the Chair. 
This can be truly a bipartisan effort that we need to have a 
strategy towards China today, not a strategy that develops 
after an incident occurs and that we are in a reactive posture. 
We have the opportunity to lay out a clear roadmap here on how 
the U.S., China, and our allies can usually be successful, 
rather than locked in this long-term strategy of adversarial 
relationship that regretfully could end up in a kinetic 
situation. So with that, I would reach across the aisle to my 
colleagues to support what could be a bipartisan lever here on 
holding China accountable for their subsidies act.
    And again, I want to thank the committee for hearing from 
this incredible group of witnesses and your expertise in the 
area. With that Mr. Chairman, I yield back.
    Mr. Lawler. The gentleman yields back. The gentlewoman from 
Indiana, Mrs. Houchin, is recognized for 5 minutes.
    Mrs. Houchin. Thank you, Mr. Chairman. And thank you all 
for taking time to come and speak to us today. Given the events 
occurring over the weekend, the Chinese spy balloon crossing 
the breadth of the United States with what appears to be a 
clear attempt to spy on our military assets, I am really glad 
that for this first substantive committee hearing, we are 
discussing this important topic, about the People's Republic of 
China, the Chinese Communist Party's threat to our financial 
institutions and economy, but also our national security and 
our way of life.
    I have a question for Mr. Feddo. As a free market 
conservative, I read your testimony and I am particularly 
interested in your comments on how we can mitigate our risk 
while also maintaining a strong, open, free market investment 
environment.
    Mr. Feddo. Thank you for the question. What I am focused on 
primarily in the written testimony is this notion of creating a 
new outbound screening investment regime, a new committee to 
and a new bureaucracy to go with it. I tend to be a little shy 
of expanding government, and if we need to do it, to make that 
decision based on facts and on a rational basis and make sure 
that it is tailored to the problem we have defined. Here, I am 
not sure we completely understand what we want to try and stop. 
I don't dispute that there is a national security risk, the gap 
may need to be closed, and Mr. Ashooh can help me here, I 
think, in a second. But what my thought is, is to use something 
like what Mr. Barr is proposing, which is an expansion of the 
CMIC list, sort of a combination of the use of sanctions and 
export controls. It will be nimble. It will be precise. And it 
will be clear to private actors what is in and out of scope.
    But first, whether we go the committee route, and I have 
outlined a series of questions we really do need to answer 
before creating a new bureaucracy, or whether we go a sanctions 
route, we need to be very clear what it is, where the national 
security risk is, and I think the intelligence community can 
help with that.
    Mrs. Houchin. You note that the previous Congress and the 
Biden Administration had considered creating a new government 
agency with very broad powers, that would even oversee American 
firms and their allocation of resources and property and 
capital outside of the United States, not just limited to 
China. And I believe your analysis of creating another 
bureaucracy with undefined and far-reaching powers certainly 
spoke to me and my constituents as an extreme version of 
overregulation, and perhaps growth-stifling policies that could 
have a chilling effect on U.S. companies.
    So I am wondering, you mentioned in your comments that 
CFIUS has some existing jurisdiction that could potentially be 
utilized here with the goal of regarding the threat of China 
through sanctions of Chinese military companies modifying 
export restrictions and building a comprehensive record of the 
risk gap, and I appreciated your line of questions there. I do 
hope that we will also take a look at things in the whole of 
Congress, espionage attempts, hacking attempts, attempts to 
steal U.S. technology, companies owned, debt held, land 
purchased, and other national security threats by the PRC, and 
the CCP.
    I am wondering if you have any comments finally, and this 
could be directed at really any of the witnesses_Mr. Willems, 
Mr. Ashooh_should we be concerned that outbound investment 
streaming can go too far, and what are your comments on that?
    Mr. Ashooh. Sure. The answer is yes, especially when you 
are discussing financial investments. One example from Akron 
Pharma was this concern over risks presented by joint ventures 
between American companies and Chinese companies, and even that 
was a very expansive concept blocking a particular kind of 
business transaction through the legislative process that these 
committees went through. It came to the conclusion that it 
wasn't really about the joint venture, but rather what 
technology could be transferred, and I think that is what we 
need to do here. Is it just that an investment is outbound or 
what is at the root of the concern, and then do we have the 
authority, and my bet is we probably do have the authority; we 
just need to tweak a little bit.
    Mrs. Houchin. Yes, okay. Thank you.
    Mr. Willems, do you have any comments? I did see you were 
nodding your head.
    Mr. Willems. I agree, and I am happy to elaborate in 
writing.
    Mrs. Houchin. Thank you. My time has expired, Mr. Chairman. 
Thank you.
    Mr. Lawler. The gentlewoman's time has expired. The 
gentleman from Tennessee, Mr. Ogles, is recognized for 5 
minutes.
    Mr. Ogles. Thank you, Mr. Chairman. In our first hearing, 
the House Financial Services Committee is highlighting the 
existential threat of China. In that vein, I would like to 
thank the chairman for his leadership and my colleagues for 
their invaluable contributions, offering no less than 17 bills 
aimed at deterring CCP aggression. I would also like to offer 
some observations and recommendations of my own.
    Currently, we are allowing the genocidal Chinese Communist 
Party access to trillions of dollars through our capital 
markets, echoing Chair Luetkemeyer. We are directly subsidizing 
the CCP's military modernization and enabling its horrific 
human rights abuses. While we spend nearly a trillion dollars 
on our own defense, we diminish that very investment as China 
uses revenues from our capital markets to flout the rule of law 
in the South China Sea. Case in point, the CCP was able to 
develop a brand-new warship, the Fujian, because Beijing raised 
more than $8.6 billion back to 2015.
    So Mr. Willems, looking at your written testimony and 
perhaps sanctions towards the Chinese Military-Industrial 
Complex (CMIC), what might you envision that we do as a 
Congress to prevent the United States from essentially building 
carriers and battleships that are being used against our 
allies?
    Mr. Willems. I think there are two things I would look at 
here, and the first is what you alluded to, which is the CMIC, 
making sure we are plugging all applicable gaps and we are 
covering all types of financing that can go to those military 
companies. So, that is number one.
    The second one is export controls, and export controls can 
be a tool to prevent our technology from going to China that 
can be used to support that exact same military development. I 
think, as I alluded to in my testimony, that the way in which 
you do export controls is critical. It can't just be the U.S. 
alone, it needs to be coordinated, otherwise, other countries 
can step in and supply the same technology. So, I would use 
both CMIC and export controls, but both of those tools need to 
be carefully coordinated with others.
    Mr. Ogles. Yes, sir. As a follow-up to the committee, as an 
economist, I look at the current state of China, and I see some 
economic vulnerabilities, and I think there is evidence to 
document that much of their economic data is actually 
fabricated. So as we look as a Congress, how do we go on 
offense, and, quite frankly, take advantage of their economic 
weakness and assert America's dominance in the global 
marketplace?
    Mr. Ashooh. I think one thing that we could do more of and 
be better at is identifying vacuums before they manifest 
themselves. In the case of Russia, I doubt Russia is going to 
be the same state sponsor of whatever around the globe that it 
has been. That is creating a vacuum. Venezuela is a good 
example. As we have seen, China has moved in. The economic 
weakness, as you point out, are limitations on China's ability 
to do that, and it is even more acute if the U.S. is there to 
meet them at that challenge. So, I think anticipating where 
those gaps are going to be is wise policy for us.
    Mr. Ogles. Mr. Feddo, or anyone else?
    Mr. Lorber. It is a great question. The comment I would 
make on that is, if that is the objective, then taking away the 
easy wins for them makes a lot of sense, right? To your 
conversation earlier with Mr. Willems, if you are in a 
situation where they are able to secure financing for a wide 
range of civil military activities, taking away that avenue 
means that if they want to continue to maintain that pace of 
development and that pace of deployment, it means that they 
will have to find that money and those assets somewhere else, 
which makes it costly and riskier for them to do so. So, I 
think it is a two-fold approach. It is identifying the 
vulnerabilities and then also plugging what we think are the 
easy ways that they are able to access U.S. financial markets.
    Mr. Willems. Okay. I would just add that I completely agree 
with where you started with this, which is to say that their 
economy is probably not growing as fast as they want us to 
think it is. They are more vulnerable, and there is a lot of 
division, even within the Chinese Communist Party. Xi Jinping 
is not as secure in his position as many of us often think and 
has his own vulnerabilities at home. And I just think, through 
our intel community, through the way we do business, we need to 
recognize where those vulnerabilities are and exploit them 
because, again, China is not a monolithic state. They are more 
unstable than we actually realize, and I think trying to figure 
out where that instability is and putting the finger on it is 
good for the United States.
    Mr. Ogles. Mr. Chairman, I just want to thank the panel for 
being here. This has been a long day. You all are amazing and 
very much appreciated. I yield back.
    Mr. Lawler. The gentleman's time has expired. The gentleman 
from Florida, Mr. Donalds, is recognized for 5 minutes.
    Mr. Donalds. Thank you, Mr. Chairman, and panel. Yes, it 
has been a long day. I will give you that. Obviously, the 
economic issues, threat, however you want to categorize it, 
with China are extensive, and as a nation, we have a lot of 
work to do, a lot of work. One of those areas of focus of mine 
and, frankly, for our country should be in the energy space. As 
we have learned over the last year, it is critical that the 
U.S. really strengthens its domestic energy supply, and 
strengthening our energy supply is probably the biggest 
investment we can make in our economy.
    The second biggest, I would argue, largely comes out of 
this committee with financial regulation and the regulatory 
environment. On Thursday, I am introducing legislation that is 
called the Protect American Energy from China Act. This 
legislation will prohibit Federal funds from being used to 
implement a memorandum of understanding (MOU) signed in 2011 by 
the Department of Energy and the Chinese Academy of Sciences. 
The MOU addresses the sharing of information, equipment, 
personnel, et cetera.
    Mr. Ashooh, can you speak to the importance of protecting 
the integrity of the U.S. energy sector? Why is that critical 
to our economy?
    Mr. Ashooh. I can, Congressman. Thank you for the question. 
I don't think we have come to hear about energy today, so this 
is an important one to touch upon. Speaking from an export 
control perspective, it is worth reminding the committee that 
the Department of Energy is one of the regular members of the 
interagency that approves all licenses, and that is important 
for two reasons. One is, there are a lot of fairly standard 
ideas around energy, but there is a lot happening in the 
emerging space. And it is really critical that we get our 
licensing right, that we protect what we need to protect, and 
that we allow collaboration where it makes sense for American 
innovation. So in that respect, as a technology-driven industry 
sector, it is important that we get that balance right.
    Mr. Donalds. Okay, and I appreciate that. Mr. Feddo? And 
you all can all comment, however you feel about it. It is kind 
of the free-for-all time at this committee. You can kind of do 
what you want, so if anybody else wanted to comment, you can go 
right ahead. That is fine.
    Mr. Feddo. I would just say our investment screening tool, 
CFIUS, frequently looks at energy-related investments to ensure 
the technology that Mr. Ashooh referred to as protected doesn't 
fall into the wrong hands.
    Mr. Willems. I am going to tackle this from a slightly 
different angle. I agree with my colleagues. And I think that 
there are again, these restrictions and things that we need to 
put in place. But on the other hand, the other thing we need to 
be doing is unleashing American energy exports around the 
world. That is good for our economy. And I do think that, in 
addition to restricting where we need to restrict, we need to 
think about where China is as a market that can benefit our 
economy and take advantage of that because, again, Chinese 
purchases of U.S. products is subsidization for U.S. 
innovation.
    Mr. Donalds. Great. Mr. Lorber, I have a question for you 
in particular. Obviously, we have a lot of businesses that do a 
lot of various things in China. What are some of the best ways 
you think that we can protect American businesses from covert 
espionage and the CCP, IP theft, and really weaponization 
against our businesses with shell companies here in the United 
States?
    Mr. Lorber. It is a great question, and there are multiple 
sorts of ways to think through it. First and foremost, 
obviously, companies have an obligation to protect themselves 
or at least most of them do, but I think beyond that, there is 
a two-fold answer to it. One is in situations where you think 
there is or is likely to be intellectual property theft or 
other some type of corporate espionage, so on and so forth, the 
U.S. Government having the appropriate tools to say to the 
Chinese, that is not acceptable, and we will sanction, we will 
designate an entity, or whatever it may be, as a result.
    On the question, I think, which is a little bit different 
of the shell companies that you mentioned at the end, as I was 
talking with one of your colleagues earlier, the United States 
is in sort of the mid-level stages of putting into place an 
effective and robust system to understand who is behind front-
end shell companies that have registered in the United States. 
And once that is fully implemented, which should happen 
hopefully within the next year or two, I think that will be 
equally impactful way to prevent exploitation of U.S. markets.
    Mr. Donalds. Expand on that thought a little bit. We are in 
the middle of the game and actually figuring out how to ferret 
this stuff out?
    Mr. Lorber. Right. As was discussed, the Corporate 
Transparency Act and the Anti-Money Laundering Act were passed 
within the last 2 years. So, U.S. regulatory authorities are in 
the process of rolling out the relevant rulemaking that is 
required under those pieces of legislation.
    Mr. Lawler. The gentleman's time has expired. The 
gentlewoman from Texas, Ms. De La Cruz, is recognized for 5 
minutes.
    Ms. De La Cruz. Thank you, Mr. Chairman. Thank you so much 
for holding this important hearing to combat the economic 
threat from China, and I would sincerely like to thank all of 
the witnesses for being here. I know this is an all-day event, 
but your insight is very valuable to us.
    Today, we are seeing heightened Chinese aggression on 
multiple fronts, and we just saw this week alone the Chinese 
balloon, which we have spoken about several times. It is 
critical here in the Committee on Financial Services that we 
are mobilized in our financial and oversight tools to address 
the China challenges. Later this month, I am planning to 
introduce a bill to direct the Comptroller General of the 
United States to study the illicit financing associated with 
synthetic drug trafficking. As you know, I am on the border in 
Deep South Texas, so drug trafficking and China's involvement 
is very important to me and to my district. This study will 
outlay for Congress the business model that organizations are 
carrying out with the trafficking and how they move and hide 
illicit gains, and what the U.S. Government can do better when 
it comes to fentanyl money laundering. So, again, this is 
something near and dear, and impactful for our district.
    I would like to ask you all if you have any kind of clarity 
on the ties between the Mexican cartels and the Chinese 
Communist Party, if you have seen any ties, distinct ties, or 
know of any ties?
    Mr. Lorber. I am happy to take the first cut of that 
question, and it is obviously a very, very important one. I 
know that starting really in 2017, during the Trump 
Administration, the Treasury Department began looking very 
earnestly at illicit fentanyl trafficking generally, but 
specifically those networks and their touchpoints with 
jurisdictions including China. In terms of specific ties, we 
have seen publicly-reported information from the Treasury 
Department, as I was discussing with a colleague of yours, 
about Chinese companies that are making precursors to fentanyl 
and shipping those fentanyl products to Mexico, which are then 
finding their way across the border into the United States. So, 
there is some limited information that has been made public. 
With that being said, I do think a study to further explore 
that information is the goal of getting what I think is a 
worthwhile endeavor.
    The other point I will make on it as well, and this is a 
conversation I was having with one of your colleagues, is that 
it is very important to have the relevant regulatory 
authorities in the United States publish as much information 
that is digestible by the private sector as they can in order 
to arm the private sector with that information to detect, 
disrupt, and deter such activity. The Financial Crimes 
Enforcement Network (FinCEN) at the Treasury Department has 
done a really good job over the last few years of publishing 
in-depth guidance documents that are meant to tell financial 
institutions this is the type of activity we are concerned 
about, this is the type of activity that you should focus on as 
financial institutions, and I think that has made a real 
impact. If it is a priority, it seems like it absolutely is a 
good candidate for that type of activity as well.
    Ms. De La Cruz. So what I am hearing is that the GAO should 
make a first step in actually trying to find the flow of the 
money and stop the flow of the drugs and people across our 
borders. And you feel a study will be beneficial.
    Mr. Lorber. I think that is right. I also do think that it 
would be very important to have Treasury work, not 
collaboratively, but sort of in parallel track, because I think 
that the Treasury Department will have access to additional 
information that the GAO may not have access to, which could be 
useful in providing information to the private sector to help 
disrupt and to deter.
    Ms. De La Cruz. Thank you. I yield back.
    Mr. Lawler. The gentlewoman yields back. The Chair now 
recognizes himself for 5 minutes.
    Thanks to the witnesses for being here today. I know it has 
been a long day, and I want to thank Chairman McHenry and 
Ranking Member Waters for holding this hearing. Mr. Feddo, you 
served as the first ever Assistant Secretary for Investment 
Security and oversaw the implementation of the Foreign 
Investment Risk Review Modernization Act (FIRRMA), which passed 
on a strongly bipartisan basis. Can you please elaborate on the 
effectiveness of FIRRMA in ensuring a welcoming investment 
climate while protecting our national security interests?
    Mr. Feddo. Sure. Thank you for the question. I think what 
makes that balance, the way the law has been drafted in the 
regulations have been implemented, is it has limited 
jurisdiction focused on specific things. For example, the 
purchase and the control of a U.S. business by a foreign person 
gives jurisdiction, but the paradigm, the lens through which 
that is scrutinized is a national security lens exclusively. 
And there is an enumerated list of national security factors 
that the government considers on whether or not to clear a 
transaction.
    Similarly, with non-controlling jurisdiction, minority 
investments that give some level of influence or access over 
the U.S. businesses has been limited by the Congress to very 
specific areas, something related to collection and maintenance 
of sensitive personal data related. The business relates to 
critical technology that is export controlled, or it relates to 
a company that utilizes or is involved with part of our 
country's critical infrastructure. And because of the precision 
with which those areas of jurisdiction are defined in very 
clear rules, the private sector has very clear swim lanes on 
what is of concern and what isn't. Further, it is a voluntary 
process, so it gives some latitude to the private sector to 
understand there really is an open investment environment.
    Mr. Lawler. Thank you. There has been some concern 
obviously raised over TikTok. However, similar concerning 
situations are present in our financial systems as well. Two 
prime examples of that are broker-dealers that are subsidiaries 
of Chinese parent companies Webull and Moomoo. According to 
Webull CEO, Anthony Denier, ``Webull is both a U.S. and a 
Chinese company. Our technology team is based in Hunan, China, 
while all of our customer-facing and brokerage operations are 
in New York City.''
    The company also is partially owned by Xiaomi, a Chinese 
company whose consistent security concerns led to their 
temporary inclusion on a U.S. Department of Defense blacklist 
in 2021. Moomoo is owned by Futu Holdings, which has close ties 
to Tencent, a company with known ties to the CCP. Concerns 
about these companies have been echoed by others on the Hill 
with these companies being the focus of letters from Senator 
Cotton to the Director of National Intelligence, and from 
Senators Tuberville, Braun, Scott, and Marshall to the SEC 
Chair. With millions of Americans using these apps, how 
concerned should we be about the potential for personally-
identifiable information or other user data to be shared with 
parent companies with strong ties to the CCP?
    Mr. Feddo. Very concerned. This is a data economy, and it 
is very clear what the PRC views about the importance of 
collecting as much information as available and possible, and 
leveraging that for its own use and advantage.
    Mr. Lawler. In the interest of time, just to that point, so 
if it is very concerning, what do you think should be done to 
address that in a meaningful way to protect the privacy of U.S. 
citizens and companies?
    Mr. Feddo. If it is a CFIUS transaction, if it is one that 
is within jurisdiction, that would be something that I think 
the committee would want to look at. And when I was at 
Treasury, I frequently got letters from Members bringing to my 
attention transactions of concern. Some of them were not within 
our jurisdiction, but we very seriously considered every letter 
we received.
    Mr. Lawler. Thank you. The chairman's time has expired.
    I would like to thank the witnesses, on behalf of Chairman 
McHenry, Ranking Member Waters, and the members of this 
committee, for their testimony today. I know it has been a long 
day.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.