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



               ASSESSING U.S. EFFORTS TO COUNTER CHINA'S
                   COERCIVE BELT AND ROAD DIPLOMACY

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

                                HEARING

                               BEFORE THE

                      COMMITTEE ON FOREIGN AFFAIRS
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             June 14, 2023

                               __________

                           Serial No. 118-33

                               __________

        Printed for the use of the Committee on Foreign Affairs





               [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
               
               
               


 Available:  http://www.foreignaffairs.house.gov/, http://docs.house.gov, 
                      or http://www.govinfo.gov

                               ______
                                 

                 U.S. GOVERNMENT PUBLISHING OFFICE

53-672PDF                 WASHINGTON : 2023










                      COMMITTEE ON FOREIGN AFFAIRS

                   MICHAEL T. McCAUL, Texas, Chairman

CHRISTOPHER H. SMITH, New Jersey     GREGORY MEEKS, New York, Ranking 
JOE WILSON, South Carolina               Member
SCOTT PERRY, Pennsylvania	     BRAD SHERMAN, California
DARRELL ISSA, California	     GERALD E. CONNOLLY, Virginia
ANN WAGNER, Missouri		     WILLIAM KEATING, Massachusetts
BRIAN MAST, Florida		     AMI BERA, California
KEN BUCK, Colorado		     JOAQUIN CASTRO, Texas
TIM BURCHETT, Tennessee		     DINA TITUS, Nevada
MARK E. GREEN, Tennessee	     TED LIEU, California
ANDY BARR, Kentucky		     SUSAN WILD, Pennsylvania
RONNY JACKSON, Texas		     DEAN PHILLIPS, Minnesota
YOUNG KIM, California		     COLIN ALLRED, Texas
MARIA ELVIRA SALAZAR, Florida	     ANDY KIM, New Jersey
BILL HUIZENGA, Michigan		     SARA JACOBS, California
AUMUA AMATA COLEMAN RADEWAGEN, 	     KATHY MANNING, North Carolina
    American Samoa		     SHEILA CHERFILUS-McCORMICK, Florida
FRENCH HILL, Arkansas		     GREG STANTON, Arizona
WARREN DAVIDSON, Ohio		     MADELEINE DEAN, Pennsylvania
JIM BAIRD, Indiana		     JARED MOSKOWITZ, Florida
MICHAEL WALTZ, Florida		     JONATHAN JACKSON, Illinois
THOMAS KEAN, JR., New Jersey	     SYDNEY KAMLAGER-DOVE, California
MICHAEL LAWLER, New York	     JIM COSTA, California
CORY MILLS, Florida		     JASON CROW, Colorado
RICH McCORMICK, Georgia		     BRAD SCHNEIDER. Illinois
NATHANIEL MORAN, Texas
JOHN JAMES, Michigan
KEITH SELF, Texas

                    Brendan Shields, Staff Director

                    Sophia Lafargue, Staff Director











                            C O N T E N T S

                              ----------                              
                                                                   Page

                               WITNESSES

Pyatt, Honorable Geoffrey, Assistant Secretary, Bureau of Energy 
  Resources, U.S. Department of State............................     8
Venkataraman, The Honorable Arun, Assistant Secretary of Commerce 
  for Global Markets, and Director General, U.S. and Foreign 
  Commercial Service.............................................    19
Herscowitz, Andrew, Chief Development Officer, U.S. International 
  Development Finance Corporation................................    27

                                APPENDIX

Hearing Notice...................................................    69
Hearing Minutes..................................................    71
Hearing Attendance...............................................    72

    STATEMENT SUBMITTED FOR THE RECORD FROM REPRESENTATIVE CONNOLLY

statement submitted for the record from Representative Connolly..    73

            RESPONSES TO QUESTIONS SUBMITTED FOR THE RECORD

Responses to questions submitted for the record..................    75









 
               ASSESSING U.S. EFFORTS TO COUNTER CHINA'S
                   COERCIVE BELT AND ROAD DIPLOMACY

                        Wednesday, June 14, 2023

                          House of Representatives,
                      Committee on Foreign Affairs,
                                                    Washington, DC.

    The committee met, pursuant to notice, at 2:12 p.m., in 
room 210, House Visitor Center, Hon. Michael McCaul (chairman 
of the committee) presiding.
    Chairman McCaul. The Committee on Foreign Affairs will come 
to order.
    The purpose of this hearing is to understand the threats 
posed by China's Belt and Road Initiative and review the 
strategies and actions taken by the Biden Administration, 
specifically looking at the role of the Foreign Commercial 
Service, State Department's Energy Resources Bureau, and the 
International Development Finance Corporation, or DFC, the role 
they play in countering China's coercive Belt and Road 
Initiative.
    I now recognize myself for an opening statement. There's no 
denying that the threat from the Chinese Communist Party is 
real. The tentacles of the CCP reach every corner of the globe 
as they continue to pull nations into their sphere of 
influence.
    Just this past week we learned a Chinese spy station 
located 100 miles off the coast of Florida in Havana, Cuba. 
China's malign influence is growing exponentially and its 
encroachment into the Western Hemisphere poses a clear and 
present danger.
    Now is the time to act and address this with the 
seriousness it deserves. We need a whole of government approach 
including a concerted effort among the State Department, the 
Commerce Department, the Development Finance Corporation to 
successfully counter CCP's Belt and Road.
    The BRI seeks to develop a system of PRC-controlled 
infrastructure, energy, transportation, trade, and production 
networks across the globe. The BRI initiative encompasses over 
150 nations with a significant focus across Africa and the 
Indo-Pacific and a growing focus on Latin America, the 
Caribbean, and even Europe.
    This debt trap diplomacy is saddling developing nations 
with unsustainable debt, which China then leverages into 
increasing its influence. BRI initiatives often lock countries 
into reliance on PRC systems, leaving countries vulnerable to 
exploitation by the PRC.
    Specifically, PRC uses its investments across strategic 
sectors to secure PRC exclusive or near exclusive to and 
control over dual use infrastructure and programs that can be 
used in conjunction with the PRC's military-civil fusion 
program to help the PRC project coercive power into critical 
global regions.
    Some of these projects include 85 percent of Hungary's 
largest ever infrastructure project. A $1.9 billion railway 
link to Serbia will be financed with a loan from China's 
Export-Import Bank.
    Huawei has constructed up to 70 percent of Africa's 
information technology 4G infrastructure including telecom, 
national and government networks which have been used for 
surveillance of opposition leaders.
    While China has focused on consolidating power we have 
prioritized a $100 billion climate fund to help developing 
nations transition to clean energy and strengthen their climate 
resiliency, offering Palestinians $100,000 to promote 
diversity, equity, and inclusion in arts and sports, and a 
State Department grant of over $20,000 for drag shows in 
Ecuador.
    How are we supposed to lead when this Administration 
prioritizes green projects and social issues rather than 
applying our resources to counter the malign influence of the 
CCP?
    This must change, and I want to refer to the Wall Street 
Journal article that was written by the president of Uganda and 
it's entitled ``Solar and Wind Force Poverty on Africa.'' He 
says Africa cannot sacrifice its future prosperity for Western 
climate goals.
    The DFC was created, and I was part of it, to counter the 
CCP's BRI and advance U.S. security interests and transition 
countries from aid to trade through strategic development 
investments.
    We must make it clear that our assistance is designed to 
build bridges to prosperity. Additionally, the Foreign 
Commercial Service is prioritizing developing nations. We have 
22 officers in Paris but only 12 in all of Africa. We are not 
showing up in Africa and they tell me that repeatedly.
    We need to be on the ground and on the field working to 
counter BRI and the CCP's influence. That was the intent of 
Congress, not to advance some social, gender, or some 
environmental but to advance private investment to counter 
China's aggression.
    And look at this map. All of the green and blue are 
projects throughout the globe spanning across Asia into Europe 
and Africa and into Latin America, over 150 countries now.
    For every nation FCS is involved in the CCP does not just 
have a footprint but a regional stranglehold as the FCS is 
woefully outnumbered and so is the DFC.
    Regions where the CCP but the FCS is not engaged are rife 
with opportunities for U.S. business. U.S. investment will 
further embolden our relations and strengthen these economies 
on an array of industrial areas including, and importantly, 
critical minerals and I find it startling that China controls 
the vast majority of global critical mineral refining. It 
refines 68 percent of nickel globally, 40 percent of copper, 59 
percent of lithium, 73 percent of cobalt.
    If China controls the global supply of critical minerals it 
will give them an edge in the development of advanced 
technology, and following the deadly withdrawal of Afghanistan 
China is moving in quickly. The CCP link to a 25-year-long 
contract to extract oil and are negotiating a deal for access 
to lithium reserves that could be worth up to a trillion 
dollars.
    They're also looking, consistent with Belt and Road 
practices, and it's foreseeable--they are looking to take over 
Bagram Airbase. After 20 years of blood and treasure and 
sacrifice this is how it ended.
    This is the Administration's greatest failure. We cannot 
remain silent on China. We must prioritize developing our own 
supply chains where we are not reliant on our greatest 
adversaries like the Chinese Communist Party.
    Let's get back to the intent of Congress and what Congress 
intended to get private American investment to compete against 
Communist China.
    And with that, I now recognize the Ranking Member, Mr. 
Meeks.
    Mr. Meeks. Thank you. Let me begin by thanking Chairman 
McCaul for organizing this hearing and the witnesses for 
appearing before us today.
    This discussion is pivotal to how the United States 
undertakes a strategic competition with China because the Belt 
and Road Initiative, a.k.a. BRI, is central to Beijing's 
strategy to grow its economic and strategic influence globally.
    I want to start by talking about what we know about BRI. We 
know that BRI has increased the likelihood of debt crises 
globally. We know that BRI lowered infrastructure financing and 
negotiation standards.
    We know that BRI projects have extracted natural resources, 
harmed the environment, and undermined labor standards in many 
countries.
    We know that BRI has exploited corruption and poor 
governance and has created economic dependencies and political 
leverage that Beijing uses to its political and strategic 
advantage.
    After 10 years of BRI this is old news so I hope we will 
not spend today's hearing bemoaning all the things we know 
while simply admiring the challenge facing the United States 
because complaining isn't competing, and to be able to be most 
effectively to compete we have to know the terms of the 
competition.
    This is first and foremost a competition about results. 
It's about how the United States engages in diplomacy, 
development, trade, and investment that leads to better 
outcomes for the American people and people around the world.
    Whether you're a citizen in sub-Saharan Africa or Southeast 
Asia or Central America, you do not need the United States to 
tell you about the problems of BRI. You've experienced them 
firsthand.
    The reason BRI has grown into such an expansive global 
initiative despite these failures is because it taps into 
legitimate development needs around the world. China has 
responded to the global demand for assistance, for 
infrastructure, and for greater trade and investment networks.
    The United States does not want to force countries to 
choose between China and the United States. But we must make 
clear that they have a choice. In order to do that what we need 
is a proactive agenda for global diplomacy, for global 
development, and economic growth.
    We can only compete with China if we offer other nations a 
credible alternative. We must demonstrate that the United 
States' assistance and infrastructure lead to better 
development outcomes, stronger governance, as well as better 
social and environmental outcomes for local communities, and we 
must leverage our partnerships with like-minded nations and 
multilateral institutions.
    So what does this mean? It means working together with our 
allies to resource the Partnership for Global Infrastructure 
Investment. That means making the Minerals Security Partnership 
more inclusive and collaborative.
    It means expanding and resourcing new initiatives such as 
the partners in the Blue Pacific, who we met with in a 
bipartisan way yesterday. It means Power Africa and Prosper 
Africa. That means legislating an equity fix for the DFC to 
improve its capacity and its ability to compete with the BRI on 
infrastructure.
    One thing we cannot do is say we're competing but then tie 
our agencies' hands through budget cuts. According to witness 
testimony China's tradeoffices outnumber ours three to one and 
China spends more than $110 million annually in support of its 
companies at global trade fairs.
    How much does the United States spend, $5 million to $7 
million? And, of course, DFC's budget pales--it pales in 
comparison to the amount of money China is spending on 
infrastructure.
    But instead of joining in a bipartisan fashion to meet this 
challenge, unfortunately, when I look at what our Republican 
majority has sought to dramatically slash, development and 
diplomacy spending, when I looked at proposed--it slashes 
substantially development and diplomacy spending.
    That's a warning. We cannot compete with China if we do not 
believe in dollars for development and we do not believe in 
diplomacy, and why believing is not just talking. It's by 
putting your money where your values are. That's how we make 
that determination.
    So what was shocking to me yesterday, according to reports, 
the House Appropriations Committee's top line allocations, the 
Republican proposal is worse than what I thought.
    It would be the most poorly resourced diplomacy because 
what they want to do is cut U.S. foreign assistance by 31 
percent. It would be the worst poorly resourced diplomacy and 
development budget in a generation, and if the final budget 
aligns with the Republicans' proposed cuts it would serve as a 
self-inflicted wound to the United States and a danger to 
American interests and global standing.
    And with that, I yield back the balance of my time.
    Chairman McCaul. The gentleman yields back. Other members 
of the committee are reminded that opening statements may be 
submitted for the record.
    We're pleased to have a distinguished panel of witnesses 
before us today on this important topic.
    First, Mr. Geoffrey Pyatt is the Assistant Secretary for 
the Bureau of Energy Resources at the State Department and has 
had a long distinguished career as an ambassador. Mr. Arun 
Venkataraman is the Assistant Secretary of Commerce for Global 
Markets and Director General at the U.S. and Foreign Commercial 
Service. Thank you.
    And Mr. Andrew Herscowitz is the chief development officer 
of the U.S. International Development Finance Corporation.
    Your full statements will be made part of the record. I ask 
that you keep your remarks to 5 minutes.
    I now recognize Mr. Pyatt for his opening statement.

STATEMENT OF THE HONORABLE GEOFFREY PYATT, ASSISTANT SECRETARY, 
      BUREAU OF ENERGY RESOURCES, U.S. DEPARTMENT OF STATE

    Mr. Pyatt. Thank you very much.
    Chairman McCaul, Ranking Member Meeks, members of the 
committee, thank you for the opportunity to discuss the 
Administration's efforts to strengthen global energy security 
and counter the PRC's attempts to create economic dependencies 
and coerce others through its Belt and Road Initiative.
    Prevailing in our economic competition with China and 
ensuring that the United States remains the partner of choice 
on issues of energy security and energy transition has been a 
priority for me from day one in the ENR Bureau.
    Secretary Blinken frames our economic relationship with the 
PRC in three words: invest, align, and compete. National 
Security Adviser Sullivan emphasizes the goal is to derisk not 
to decouple, and he notes that this effort extends beyond our 
borders and includes working with like-minded partners to 
advance our collective technology and industrial base.
    ENR's work on energy security and energy transition, 
including its congressionally funded technical assistance 
programs, are integral to that effort.
    We have all seen what happens when malign actors weaponize 
their energy resources. Russia attempted to do this with 
natural gas in Europe last year and failed, thanks in part to 
the work of American LNG producers.
    ENR is similarly engaged around the world to expand 
countries' options and counter the PRC's efforts to monopolize 
the next generation of clean energy technologies. In Latin 
America and the Caribbean the United States remains the energy 
partner of choice, a message I heard repeatedly during my 
recent trip to Guyana and Trinidad and Tobago.
    But we also see the PRC targeting Latin America for 
investments in critical minerals, energy grids, and renewables.
    ENR assistance in Ecuador, for instance, helped the 
government design and conduct the country's first ever 
competitive and transparent tenders for new generation 
capacity. And DFC recently announced that it will provide 
financing for a 200-megawatt solar power project that was 
awarded through that process, providing a strong example of how 
U.S. Government tools can complement each other to counter the 
PRC model.
    We also recognize that some of China's larger investments 
in energy supply chains are being led by ostensibly private 
companies with ties to the PRC.
    For example, in August 2022 PRC manufacturer CATL announced 
plans to invest over $7 billion in a new battery gigafactory in 
Hungary intended to lock in supplies for BMW and Mercedes.
    PRC investments in critical infrastructure in Europe create 
clear security risks and ENR has engaged with allies and 
partners to facilitate U.S. alternatives.
    In Romania, for example, we're working actively with EXIM 
and DFC on nuclear power projects to advance our climate goals 
and level the playing field for U.S. exporters.
    Similarly, in Greece we work closely with DFC to complete 
the Elefsina Shipyard investment that otherwise might have 
fallen into PRC hands in a country that Beijing labeled the 
dragon's head of the Belt and Road Initiative in Europe.
    We're also competing with the PRC model for energy 
investment and development in Central Asia. The United States 
has long supported U.S. oil and natural gas investment in 
Central Asia and now we're looking to renewables and critical 
minerals.
    But the PRC has made some headway, for instance locking in 
75 percent of Turkmenistan's pipeline gas.
    Further east ENR is strongly focused on support for a free, 
open, and prosperous Indo-Pacific. Since taking this role I've 
traveled to Japan, the Republic of Korea, Pakistan, and India 
to advance our cooperation on energy security and renewables.
    I held an inaugural strategic energy dialog with Japan in 
December and continued our important dialog with the Republic 
of Korea, two countries that are key to reducing PRC dominance 
of clean technology supply chains.
    ENR efforts in the Indo-Pacific increase resilience against 
PRC economic coercion and dependencies. We do this by 
leveraging U.S. interagency expertise including through the 
Department of Commerce's Commercial Law Development Program and 
DOE's national laboratories.
    Despite pledges to the contrary the PRC has continued to 
deploy coal-powered projects overseas. In Pakistan this has had 
serious financial repercussions because of its reliance on 
imported coal.
    During my visit to Islamabad Prime Minister Sharif appealed 
for more U.S. engagement to support Pakistan's clean energy 
transition including in emerging areas like clean hydrogen.
    After December's U.S.-Africa Leaders Summit the United 
States pledged to step up its energy engagement in sub-Saharan 
Africa. With this in mind next week I will travel to Nigeria to 
advance cooperation on clean energy and carbon abatement and to 
explore future energy partnership possibilities.
    The PRC owns mines throughout Africa and dominates the 
processing of the battery minerals we need to drive the energy 
transition. As part of our response to this challenge ENR 
administers the intergovernmental Minerals Security 
Partnership.
    In marked contrast to the PRC approach, the MSP aims to 
support not only developing countries' extraction but also 
higher value activities such as downstream processing and 
recycling.
    The MSP works with our partners to identify bankable 
projects around the world and ENR is also engaging with 
American mining companies to advance the MSP as I did last 
month in Alaska, ensuring that our work supports growth here at 
home as well.
    In addition to diplomatic engagement we will need financing 
to bolster these critical mineral supply chains and that's why 
ENR's partnership with EXIM, DFC, and our colleagues working on 
the PGII will be crucial to the success of these efforts.
    We need to increase their ability to assist both by 
providing more resources and reforming rules that unnecessarily 
restrict their ability to support projects.
    We should, for a start, temporarily raise the default rate 
cap that currently limits EXIM's exposure to default risk from 
2 percent to 4 percent as requested in the President's Fiscal 
Year 2024 budget.
    In the case of DFC, we encourage support for the creation 
of a new $2 billion revolving equity fund to expand equity 
investments by DFC.
    In sum, the State Department will continue to work and 
trade with the PRC in areas of mutual interest but we will also 
compete relentlessly with them economically, a contest where 
the State Department and our embassies abroad are key assets.
    Thank you very much for your attention and I look forward 
to addressing your questions.
    [The prepared statement of Mr. Pyatt follows:]

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    Chairman McCaul. Thank you.
    The chair now recognizes Mr. Venkataraman for his opening 
statement.

    STATEMENT OF THE HONORABLE ARUN VENKATARAMAN, ASSISTANT 
SECRETARY OF COMMERCE FOR GLOBAL MARKETS, AND DIRECTOR GENERAL, 
              U.S. AND FOREIGN COMMERCIAL SERVICE

    Mr. Venkataraman. Thank you.
    Chairman McCaul, Ranking Member Meeks, and members of the 
committee, thank you for inviting me here today.
    I am pleased to have the opportunity to discuss with you 
how we are competing against China's Belt and Road Initiative 
at the U.S. Department of Commerce's International Trade 
Administration and more specifically in our global markets 
business unit, which includes the U.S. and Foreign Commercial 
Service. My remarks are reflected in my full written statement 
provided to the committee.
    Notwithstanding China's efforts to portray BRI as a 
solution to advance infrastructure development and economic 
growth our trading partners increasingly share our view that 
BRI poses more risk than opportunity.
    First, China's BRI can threaten our trading partners' 
economic development. BRI projects contribute to unsustainable 
debt levels in many recipient countries, as the chair and 
ranking member have noted, and these can position China to 
press for greater control over that infrastructure against the 
interests of borrowing governments.
    Second, China's BRI threatens U.S. economic and national 
security interests. BRI investments in infrastructure, together 
with its transnational subsidies, have reinforced China's 
control over critical supply chains choke points.
    Third, China's BRI hinders U.S. companies from competing in 
markets overseas. Combined with longstanding anti-competitive 
practices BRI has used its financing to open doors for China's 
State-owned or State-controlled firms while ensuring those 
doors remain closed for market-based competitors from other 
countries including the United States.
    In the face of these challenges how do we counter the BRI 
and help American companies compete and compete to win? Our 
strategy for success rests on three pillars: one, pursuing 
market share; two, promoting market openness; and three, 
preserving market security.
    We are pursuing market share by aligning U.S. Government 
export promotion efforts to help U.S. businesses succeed in 
sectors targeted by China's State-backed entities.
    Critical to these efforts are partnerships with the 
Department of Defense, including regional commands in SOUTHCOM 
and INDOPACOM as well as with the range of agencies that form 
the deal teams at U.S. embassies around the world.
    We are also intensifying our commercial diplomacy efforts 
to promote market openness by engaging with foreign 
counterparts in critical sectors and on infrastructure 
projects.
    We are using all the tools available to us across the 
Commerce Department and the interagency, often in 
collaboration, to build necessary regulatory capacities, 
increase transparency, and enable commercial environments in 
markets around the world.
    Finally, we are focused on preserving market security both 
here at home and in overseas markets. We are promoting U.S. 
capabilities across strategic areas important to our national 
security.
    We are also focusing our efforts, including through our 
advocacy center, to ensure that China's BRI does not threaten 
either the reliable performance of critical infrastructure in 
foreign markets or the secure supply of inputs for U.S. 
production critical to our long-term economic and national 
security.
    In each of these pillars of our strategy the Championing 
American Business Through Diplomacy Act, or CABTDA, has brought 
focus to the importance of new partnerships among the State 
Department, Commerce, USTR, and others that has helped us 
collaborate and innovate in support of U.S. businesses in a 
more strategic and impactful way.
    We cannot speak about countering BRI or their commercial 
tools deployed by China without underscoring its resources. As 
Ranking Member Meeks noted this includes China's tradeofficers 
outnumbering us three to one and spending more than $110 
million annually in support of its companies at global trade 
fairs, compared to the approximately $5 million to $7 million 
annually that our budget allows.
    I am thankful that Congress provided Global Markets with 
$6.5 million in Fiscal Year 2023 to expand our capacity to help 
U.S. business compete.
    With those funds we plan to open new operations in Cote 
d'Ivoire, Guyana, and Zambia while making additional 
investments to existing operations in the Indo-Pacific region, 
Eastern Europe, and Central America, subject to approval of our 
Fiscal Year 2023 spend plan.
    Moreover, the President's Fiscal Year 2024 budget request 
includes a $16.8 million increase for Global Markets to 
continue investing in our work force at a time when we must 
show up and show up often if we are to help U.S. businesses 
compete in markets around the world.
    Thank you, Mr. Chairman and members of the committee, for 
the opportunity to speak with you today. I'd be pleased to 
answer any questions you have.
    [The prepared statement of Mr. Venkataraman follows:]

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    Chairman McCaul. Thank you.
    The chair now recognizes Mr. Herscowitz for his opening 
statement.

STATEMENT OF ANDREW HERSCOWITZ, CHIEF DEVELOPMENT OFFICER, U.S. 
         INTERNATIONAL DEVELOPMENT FINANCE CORPORATION

    Mr. Herscowitz. Chairman McCaul, Ranking Member Meeks, 
members of the committee, thank you so much for convening this 
hearing and inviting me to testify on behalf of the U.S. 
International Development Finance Corporation that we all call 
DFC.
    A key reason that you all, Congress, created DFC through 
the BUILD Act was to offer a better and more sustainable 
alternative to the People's Republic of China's Belt and Road 
Initiative.
    Since DFC was established just 3 years ago we have been 
catalyzing investment from the private sector and empowering 
developing countries.
    Unlike the PRC we focused on helping countries take 
advantage of their own resources--their human resources, their 
commodities--so they can tackle poverty, accelerate inclusive 
and sustainable economic growth, and become stable U.S. trading 
partners, all through private investment.
    DFC provides countries with an alternative to the terrible 
choice many of them faced, which was to either forego economic 
growth or embrace the PRC model that required countries to risk 
their financial independence, to suffer the loss of their 
resources and commodities, to endure environmental degradation, 
and sometimes even to suffer harm to their local communities.
    DFC and its partners give countries an alternative, 
sustainable economic growth and empowerment. The PRC model 
burdens countries with excessive sovereign debt for projects 
that are often unsuitable or even unnecessary for local 
populations.
    The PRC supports projects with one beneficiary in mind, the 
PRC. DFC, on the other hand, supports private entities, 
mobilizes private capital, and builds resilient market 
economies, creating local jobs and building local knowledge and 
human capacity.
    DFC's track record investing in critical infrastructure 
demonstrates the impact that it can have. In Ecuador we 
recently made a $150 million commitment to modernize a port, 
which will create 1,250 jobs and generate $750 million in 
foreign direct investment--private capital.
    In Sierra Leone, one of the poorest countries in the world, 
we have invested in providing broadband access to a significant 
swath of the population, we have helped increase the country's 
capacity to generate power by nearly 25 percent, and we're 
working to improve the country's main airport to connect the 
people of Sierra Leone to global markets and opportunities.
    DFC is also supporting projects that diversify supply 
chains away from the PRC including for critical minerals and 
solar panels. DFC focuses on working with the private sector 
because closing the $40 trillion global infrastructure 
financing gap is beyond the capacity of any government or any 
public institution.
    We amplify our impact by working closely with development 
finance institutions of our allies and our partners including 
our G-7 partners so that we can do more together. By working 
with like-minded countries we give countries where we work even 
more alternatives to the PRC and we generate new trade and 
investment leads for U.S. companies.
    Mobilizing private capital is an effective way to achieve 
durable development outcomes, allowing governments to focus 
their resources on other public needs like education. Our 
investments carry forward U.S. values of openness, respect for 
local conditions, transparency, and internationally recognized 
environmental, social, and labor standards.
    By championing these values we enhance the long-term 
sustainability of our projects, we amplify development impacts, 
and we guard against the danger that projects will harm local 
populations.
    I've highlighted a few examples in my written testimony of 
where we're doing this type of work. While we're confident in 
the strength of our model we know that we need to strengthen 
DFC's ability to counter BRI effectively and at scale, and to 
enable DFC to do more faster DFC is building its internal 
capacity and aligning its organizational structures to meet 
demand in sectors where there are enduring needs including 
infrastructure, energy, health, food and agriculture, ICT, and 
support for small businesses.
    In the energy sector we're pursuing a balanced approach 
that recognizing that the PRC is competing aggressively to 
dominate the clean energy industries while also recognizing 
there are circumstances which countries--when countries need 
fossil fuels to further their development.
    Congress and this committee have recognized the close 
linkage between development and U.S. strategic interests and we 
thank you for your support of DFC.
    Through continued partnership with Congress we're 
positioning DFC to be an effective, respected, and powerful 
presence for the U.S. in developing countries.
    The U.S. can compete effectively with the PRC model or any 
other model. Our model drives economic development in a way 
that benefits Americans and the people of the countries where 
we work.
    We treat the countries and their people as partners and we 
advance the strategic interests of the United States.
    Thank you again for the opportunity to testify and I look 
forward to your questions.
    [The prepared statement of Mr. Herscowitz follows:]

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    Chairman McCaul. Thank you. I now recognize myself for 5 
minutes of questioning.
    Let me say, first, the DFC--the equity issue is long 
overdue to be fixed. I am determined in a bipartisan fashion to 
get that fix marked up out of this committee and I believe Mr. 
Barr is leading that and I know on the other side, Mr. Meeks.
    Let me just start by saying when you look at China they are 
a--for purposes of the United Nations a developing nation, 
which qualifies them for World Bank loans at nearly zero to 
interest-free loans that they then use to turn around and loan 
to truly developing nations at a usurious interest rate that 
finances this whole scam.
    They know how to manipulate global institutions. Then they 
get the countries in a, through predatory lending, in a debt 
trap. They rape the rare earth minerals. They bring their own 
workers in.
    They take over a port or military base and then, at the end 
of the day, if they default or they go into bankruptcy the IMF 
bails them out. This is incredible.
    This is really an incredible story that is not out there. 
But they are really manipulating it and when they're in 150 
countries that gives them power at the United Nations.
    Twenty African nations voted against the resolution on 
Ukraine because China has them under their thumb. You know, 
I've been very invested in Development Finance Corporation. 
It's supposed to be OPIC on steroids. You know, I passed the 
Champion U.S. Business Through Diplomacy Act.
    Sir, you know, Keith Krach really ran that office well. I 
was with him just last weekend. But, in my judgment, we're 
losing this competition. If they're in 150 countries--and by 
the way, they have to sign a contract denouncing Taiwan and 
they get on the digital yuan as a direct threat to our global 
U.S. currency.
    I've really got two quick questions. One, our intention was 
to get investment in these countries--private investment to 
compete. I was with a group of African financial leaders at the 
Milken Institute. Speaking to them I asked, have any of you 
worked with the Development Finance Corporation. Not one hand 
was raised.
    I talk to Ambassadors. The ranking member does, too. They 
say, we'd rather do business with you but you're not on the 
field and if we're not on the field we cannot win. We cannot 
compete.
    This has to change, and when I looked at the president of 
Uganda's op-ed saying that this policy will force poverty on 
Africa, talking about, only certain energies can be invested 
in, or these African nations said, we do not like you imposing 
your social value system on us, and that's not what Congress 
intended.
    We passed this for national security reasons to compete 
with China and I'd like to hear comments from all of you on 
this.
    And my second question is the Partnership for Global 
Infrastructure and Investment--PGII. Now, that was supposed to 
bring together all these entities and I got to tell you, it's 
confusing even--I think I'm pretty educated but you got USAID, 
you got MCC, you got DFC, you got EXIM Bank, and a whole host 
of about 17 different--you know, that needs to be coordinated 
and it's hard to even know what are the roles of each of these, 
departments and how do they all fit together under this one 
umbrella that needs to be coordinated in this what I say are 
not Republican and Democratic issue--an American issue in this 
great power competition.
    Maybe if I can just go down straight the line if you could 
address both of those issues.
    Mr. Herscowitz. Thank you.
    Why do not I address the Partnership for Global 
Infrastructure and Investment first? I think it has the 
potential to be an extremely powerful tool for the U.S. 
Government, and I do not know if you know my background but 
before I was in this position I was the coordinator for Power 
Africa for 7 years under the Obama and Trump Administrations 
and we learned a tremendous amount about what it means to try 
to mobilize partners to try to advance infrastructure, having 
helped over 120 power projects reach financial close.
    It's challenging to coordinate the U.S. Government agencies 
but we did it very, very well and we did it with strong 
bipartisan support from Congress as well and it was a 
partnership where we sought input.
    The Commerce Department contributed in big ways by helping 
educate African ministries about how to enter into power 
purchasing agreements. State Department provided advocacy.
    So we're working from something that we have done before 
but the additional element of PGII is also bringing in our G-7 
partners and so one of the things that we at DFC have been 
doing is we have actually been mapping out what each of our 
partners, whether it's France or Japan or the U.K., can offer 
as an alternative to the BRI as well so that we can find trade 
leads and investment leads for DFC and for one another and we 
can step in when the other one cannot be there.
    So already in the last year when we look at PGII of that 
$7.4 billion that DFC did in deals last year $5.2 billion of 
those projects qualified as PGII, and so going back to your 
first question, of course, we're growing. Our portfolio has 
grown year after year. We're becoming more and more strategic.
    I can talk about some of the other specific projects but 
I'd like to leave time for my colleagues to discuss as well.
    Chairman McCaul. And my time has--it's already expired. If 
I could have a quick comment from the two of you. Thank you.
    Mr. Venkataraman. Thank you.
    Just to respond on the work that we're doing on 
infrastructure and in particular to counter BRI, one of the 
things we have at the embassies are these deal teams which are 
literally interagency teams that work together that harness the 
tools that each of us has and the first thing we do is try to 
identify the early leads, the early projects that we are aware 
of on the ground so that we can bring them to the American 
companies that we want to bid on those projects.
    We worked with foreign governments to shape their tenders 
so that their tenders are open and transparent. We also pushed 
back on China's attempts to drive single source tenders and so 
we have examples where China has gotten into government-to-
government agreements with our trading partners to require 
single source tenders for projects that would advantage China 
and we have pushed back on that and been able to undo those 
single source tenders to make sure that American companies can 
compete and win.
    Chairman McCaul. And Mr. Pyatt? Very briefly.
    Mr. Pyatt. Yes. Thank you, Mr. Chairman. I really 
appreciate the question about the strategic purpose of the DFC 
because I have a unique perspective on this issue.
    I was an ambassador serving abroad when you passed the 
BUILD Act. I remember what an incredibly powerful impact it had 
on my work in pushing back on China in Greece, a country where 
COSCO, a Chinese company, had acquired control of what is now 
the largest transshipment port in the Mediterranean.
    It made all the difference in the world to have a positive 
offer to put on the table that attached to American values and 
American investment.
    It takes time because the DFC team has higher standards 
than the PRC does, has a fiduciary responsibility to the 
taxpayers, has to deal with transparency. We have environmental 
issues.
    And I was just talking to my successor in Athens, 
Ambassador Tsunis and now DFC has completed that shipyard 
project in Greece. He sees it as transformative in terms of the 
perception of the United States. But I also saw how once we put 
that on the table China's hand was dramatically weakened.
    Chairman McCaul. Well, so when--I'm always asked, how are 
you countering China, specifically Belt and Road, and it's 
right here. This is the response.
    So we need to prevail in this great power competition. So 
we need to work with you to strengthen your hand because, in my 
judgment, we're not--we're not winning right now.
    So with that, I recognize the ranking member.
    Mr. Meeks. Thank you, Mr. Chairman, and, you know, let me 
be clear, and I think that we all agree that we do not want to 
replicate China's infrastructure model. We know that's not 
good.
    So we need our own approach that plays to what our 
strengths and comparative advantages are to deliver the 
financial and environmentally sustainable development that 
lifts up communities and facilitates trade.
    To that end, you know, we keep talking about this. How do 
we demonstrate to nations that our development and assistance--
the models that we have--are better for them, as we know in the 
long run, and their populations as opposed to China?
    How do we--first, how do we demonstrate that? So whoever 
wants to take it first.
    Mr. Herscowitz. At the most basic level one of the main 
issue--one of the main differences with DFC is that we're 
looking at the outputs, not just the inputs.
    It's not how much money that we're investing and how much 
money that we're spending--that's important because that moves 
capital--but how are people benefiting from that?
    Every single deal that we do looks at what the development 
metrics are going to be or the foreign policy metric, how many 
people are getting access to water, to electricity, to the 
internet so that we can tell that story as well.
    That's not something that the PRC is doing. We're making 
sure that our transactions are designed for that impact and we 
evaluate every single one of them in that way, and we're seeing 
huge results whether it's in healthcare, helping nearly 2 
million patients get consultations for the first time or 
helping smallholder farmers get access to credit for the first 
time.
    People feel those results and that's what really makes 
people want to get the financing. Obviously, when we support a 
huge port like we're doing in the Republic of Georgia, like 
we're doing also in Ecuador right now--an airport in Sierra 
Leone--people see the impact of our investments in those 
infrastructure projects. There's a lot more we can do but we're 
on that right path.
    Mr. Meeks. So and I guess I'll Mr. Pyatt this question and 
then I'll come--how do you--you know, again, we're in this 
competitive piece and we're talking to these countries and when 
you talk to them how would you characterize the United States' 
comparative advantages and unique strengths in the sustainable 
infrastructure development assistance space going on what we 
were just talking about so that they could say, well, we want 
you, United States?
    Because that's not--I agree with Mr. McCaul what he said 
earlier. Most of them said to the United States, you're not 
there to compete.
    We do not have an alternative. You're not giving us an 
alternative, and we need to try. So how do we do that so that 
not only can we say it we can do it?
    Mr. Pyatt. So, Ranking Member, let me start by thanking you 
for your reference to the Minerals Security Partnership because 
I think that's a great example of what you're talking about, 
and I had the opportunity to join Secretary Blinken and Reta Jo 
Lewis, the chair of the EXIM Bank, and Under Secretary 
Fernandez in New York in September when we had the first big 
public event to roll out the Minerals Security Partnership with 
some of the resource-endowed countries from the developing 
world that we're looking to work with.
    And one of the most powerful moments in that event for me 
was when one of the African ministers came up to me afterwards 
and said, you know, I just want to say thank you for showing up 
because for too long we have only had one interlocutor on these 
issues of mining and extractive industries and it's China, and 
you are giving us an alternative, and both you and the chairman 
used that idea as well in your presentation.
    So I think the first thing we have to do is show up. We 
need to mobilize resources, and, Ranking Member Meeks, I really 
appreciate your reference also to the importance of the State 
Department budget in this context.
    I had the opportunity yesterday--as you know, we have all 
of our Ambassadors in town right now and I did a roundtable 
with some of our Ambassadors focused on these issues of Belt 
and Road, critical minerals, clean tech supply chains and one 
of the--one of the chiefs of mission I asked to present was 
Lucy Tamlyn, our Ambassador in the DRC, and Ambassador Tamlyn 
made the point that today her mission has two economic officers 
covering all of the issues in that large and consequential 
country, one of the--a country with the critical endowment of 
the battery minerals that we are going to need to power our 
energy transition.
    The junior officer who covers mineral issues is very widely 
regarded and that position will have a gap of 7 months coming 
up. So we will have one person working on all of these issues 
in a country that's absolutely critical.
    So we need to resource the State Department, and then we 
have to bring things to the table and this is where the 
partnership between our three agencies and DOE is so critically 
important because it lets us bring to the table the strengths 
of the United States, our entrepreneurial ecosystem, the 
transparency of our companies.
    And I have spent a lot of time since starting this job 
traveling around the world and talking to countries that also 
are being approached by China and the answer I consistently 
hear is, please bring us more, America. Nobody ever asks for 
less U.S. investment or less----
    Mr. Meeks. Let me just as quickly because I guess I'm just 
about out of time also. I'm out of time.
    Mr. Venkataraman, how would the Foreign Commercial 
Service--how are you building on the strengths that we just 
heard about or innovating new approaches in our programs and 
initiatives around the world?
    Mr. Venkataraman. Thank you, Ranking Member.
    Well, first, I just wanted to add that showing up, really, 
in a lot of these countries means our companies showing up. 
It's important for our government to be there. It's important 
for us to be on the ground.
    But it is equally important if not more important for our 
companies to show up because, at the end of the day, as my 
colleague from DFC mentioned, it is the private investment--it 
is the private companies that are going to effectuate change on 
the ground.
    And so what we have done at the Commerce Department is make 
sure that we take what these--projects are available on the 
ground, bring them to our companies at home, bring them to 
these--to the continent or to other markets through our trade 
missions and through other vehicles where we show them these 
projects that they're aware of.
    We introduce them to the government decisionmakers. We 
provide the opportunity for the U.S. private sector to see 
opportunity where they may not be aware of it and then these 
governments know that when American companies invest they do 
not invest for the short term.
    They invest for the long term and they are able to make 
change on the ground in ways that are long lasting and are to 
the benefit of those economies.
    Mr. Meeks. Let me just say this, and I agree with the 
chairman again. I go from company--anybody that comes into my 
office, whatever company it is, financial institution, 
whatever, I ask them are they investing in Africa or in any of 
the emerging nations.
    I've yet to find one that say, yes, I'm investing. Yes, I'm 
working with the DFC. I do not find anybody that says yes to me 
and, you know, it's puzzling. You know, we've talked about the 
cuts and there's no additions, you know, from the private 
sector.
    It seems to me somebody would say, yes, I'm investing. So I 
yield back. But I couldn't agree with you more on that.
    Chairman McCaul. Yes. I think you see this is a bipartisan 
point of view.
    There are 13 votes on the House floor so the committee will 
stand in recess until after votes. Thank you.
    [Recess.]
    Chairman McCaul. I want to thank the witnesses for your 
patience during that long vote series and for staying here. The 
committee will come to order.
    The chair now recognizes Mr. Smith.
    Mr. Smith. Thank you very, very much, Mr. Chairman, and for 
calling this important hearing.
    Let me just ask a question because our last two--the 
chairman and the ranking member and, of course, Mr. Pyatt, you 
did mention it as well the importance of these minerals and--
like lithium and cobalt.
    As we all know, they're two of the world's most precious 
resources powering the lithium ion batteries which energize our 
phones, laptops, and EVs. Stable supplies are central to 
America's economic future as the International Energy Agency 
predicts a 40 and 20 fold increases in respective demand for 
lithium and cobalt by 2040.
    The Democratic Republic of Congo--and I have been there 
like I know many of you have been there as well. I've been to 
Goma. We know that the mines are very seriously being exploited 
by the Chinese Communist Party.
    Well, 70 percent of the world's cobalt is produced by DR 
Congo and excavation in newfound lithium deposits will begin 
this year. Typically, the often labor intensive artisanal mines 
rely on the toil of an estimated 40,000 children, some as young 
as six, working 12-hour days in gruesome conditions including 
exposure to life-threatening toxins, coercion, and physical 
abuse.
    Despite pervasive victimization the People's Republic of 
China has heavily invested, as you know, in these cobalt and 
lithium reserves. PRC firms own 15 of the DRC's 19 mines, five 
of which hold lines of credit totaling $124 billion from PRC 
State-owned banks.
    Instead of correcting the abuses multiple human rights 
watchdogs have reported that PRC investment coincided with a 
significant exponential increase in injuries and deaths and the 
possibility of even worse cover ups.
    Now, I've been working on a bill now for several weeks that 
I hope to be introducing shortly called Countering China's 
Exploitation of Strategic Metals and Minerals in Child and 
Forced Labor in the Democratic Republic of Congo Act. It's a 
working title.
    I did chair a hearing last July at which we heard from 
people from DR Congo and other human rights activists who 
talked about the savagery that's being imposed, all at the 
behest of the Chinese Communist Party.
    And so, you know, and many of this--this cobalt and 
lithium, especially cobalt now, will find its way into our 
batteries and so what I'm asking, you know, if you could look 
at this bill.
    I know that there are some initiatives you're taking. I'm 
meeting with our Ambassador to DR Congo tomorrow. I know she's 
in town, and I'm so happy to be doing that.
    But the bill would enforce Section 307 of the Tariff Act of 
1930, require the president to present an annual report to 
Congress on foreign persons found facilitating the exploitation 
of child labor in DRC mineral mining or evading--the evasion of 
U.S. importation laws and a number of other important 
provisions as well.
    And I, you know, will share this with you. I hope that we 
can work together on coming up with a legislative initiative. 
But I also know that you're concerned about this as well.
    Again, that hearing was an eye opener. I've had hearings on 
the mining industry many, many times in the past. But that one 
just blew me away to hear about these children who are dying, 
getting sick, getting cancers--you know, the inhalation issue, 
and then at the behest of the Chinese Communist Party, you 
know, the beatings that occurred in order to enforce compliance 
and hard-working conditions.
    Your thoughts, Mr. Secretary?
    Mr. Pyatt. First of all, Congressman, thank you very much 
for devoting so much attention to this, for taking the trouble 
to go to DRC, for meeting with Ambassador Tamlyn.
    Just showing up, as we have all talked about, is of 
critical importance. And then the other aspect of this issue, 
which Chairman McCaul alluded to in his opening statement, is 
the fact that China controls so much of the processing of these 
minerals as well.
    So their business model is to extract raw minerals and then 
take all the processing and the value addition back to China 
and then to control the global supply chain.
    We are trying to create, as both the chairman and the 
ranking member described, a better alternative. That's why we 
are, for instance, working with both DRC and Zambia on a 
battery MOU and a battery council to bring the governments 
together to identify opportunities to bring back to Africa more 
of the processing and the value addition and to create a real 
alternative to PRC's--to the PRC's role in this space.
    The other thing I would really like to put a spotlight on 
today, and you alluded to it yourself, is the critical 
importance of these technologies to American economic 
competitiveness.
    In this role I've met with Ford. I've met with GM. I've met 
with Tesla. All of our companies are chasing the EV marketplace 
because that's where consumers are going and China has used its 
years of investment in these upstream battery minerals 
resources in order to also dominate the larger story of 
electrification of vehicles.
    And in my prepared statement I noted just the reporting 
last week from the Wall Street Journal putting a spotlight on 
the rise of Chinese auto manufacturers, companies that most 
Americans have never heard of like BYD or Chery Automotive and 
as I travel around the world it's concerning to me to see how 
much headway these companies are also making in grabbing market 
share.
    So this is about strategic competition at the highest end 
of our respective economies and it's one where we're trying to 
build partnerships and also working not just with the resource-
endowed countries but with other companies that have--other 
countries that have a similar outlook, allies like Japan, like 
Korea, like the European Union. So thank you.
    Mr. Smith. I thank you. I know I'm out of time. We'll look 
to work together because I think we need to have a united front 
on this, especially with so much exploitation and so much 
corruption.
    Thank you. I yield back.
    Chairman McCaul. The gentleman yields back.
    The chair recognizes Mr. Sherman.
    Mr. Sherman. Earlier in--at the early years of this century 
I chaired the subcommittee that oversaw what was then called 
OPIC, the least fortunately named organization in American 
government since it sounded so much like OPEC.
    We--I was able to craft legislation to reauthorize OPIC. We 
got it through the House and I'm pleased that so many of its 
provisions are now in the charter of the Development Finance 
Corporation.
    Mr. Chair, I look forward to working with you to make sure 
that the Development Finance Corporation is able to make equity 
investments.
    President Biden in his 2024 budget includes a new mandatory 
proposal to outcompete the PRC including $2 billion of support 
for high-quality strategic hard infrastructure projects 
globally and $2 billion for a new revolving fund at the DFC to 
boost equity investments, and I look forward to working with 
you to make this a reality and it will have to go through our 
committee.
    But one thing I might disagree with the chairman on is I'm 
not interested in advice from--these days from the government 
of Uganda. It is most famous around the world for calling for 
the--for passing legislation calling for the execution of 
people simply because they are part of the LGBT community.
    [Side comments.]
    Mr. Sherman. And I look forward to working with Mr. Meeks 
on our other committee to push for the creation of mutual funds 
that specialize in publicly traded companies based in Africa 
and give Americans a chance to invest in private equity 
companies that will focus on Africa.
    There are six big differences between how we do business 
and China does business. First, we're a coalition of our 
government, our allies' governments, and truly independent 
private sector companies, and even when you just focus on the 
U.S. Government it's divided between two parties.
    China is a one-party State and when it comes to the 
independence of their companies not so much. So it's one entity 
versus a coalition.
    Second, we're opposed to corruption. That's why we have a 
Foreign Corrupt Practices Act. The Chinese are not only free to 
bribe, they do it and it was a subcommittee in this room where 
I presented the letter from the outgoing president of the 
Federated States of Micronesia where he details how his--people 
in his own government are being bribed by China.
    One thing that concerns me is that we do almost nothing to 
publicize this and I'm not sure that our intel community is 
really getting us all the information they could on Chinese 
bribery.
    Related to that is we're dedicated to democracy and the 
rule of law, which puts us at a real disadvantage in appealing 
and making alliances with those who want to be corrupt 
dictators in foreign countries.
    We should have a strategic alliance with the peoples of 
those countries that would like to be governed by somebody 
other than a corrupt dictator. But, of course, we do not 
publicize that we have a Foreign Corrupt Practices Act and 
China has a practice of corruption. So we get no benefit.
    We engage in genuine philanthropy. I'm going to ask our 
witnesses to raise their hands if they could give me a real 
example of where China did something just to help people and 
not for its own economic and strategic advantage.
    And I see no hands going up to volunteer to answer that 
question.
    Fourth, we care about climate. China funds new coal-fired 
plants. But I will point out for those who like to see coal-
fired plants, et cetera, the biggest investors in the Third 
World in fossil fuels are American oil and mining companies.
    And, finally, while China is crafty to make sure its 
foreign efforts advance its national interest, America, not so 
much.
    We do almost nothing to publicize their role in climate 
versus ours, our role on democracy versus theirs, and 
especially the corruption, and I have not in 26 years been 
briefed by our Intel Community on the details they've been able 
to find where you can say this Chinese entity bribed this 
foreign leader. If they do not tell me they do not tell the 
world, and I'm not sure they're gathering it.
    And finally, when it comes to being strategic, as the 
ranking member pointed out there are those pushing for a 31 
percent cut in our foreign aid, foreign development, and 
diplomacy efforts. That is not strategic.
    I do have a question, believe it or not, and that is China 
has these unfair loans. The question is why do countries pay 
them back.
    Now, the number-one reason to pay China back is so you can 
get another loan from China. But if their first loan to you was 
an anathema that does not--the real reason I've been told they 
pay back is they do not want their bond ratings reduced. They 
want to be able to borrow from the international communities 
outside of China.
    So I'll ask a reaction from our witnesses to a proposal 
where we would simply instruct the bond rating agencies that 
they cannot downgrade any country's debt rating because they 
decide to extend the middle finger in the direction of Beijing.
    Do we have--is there a witness that wants to respond to 
that? And can you think of any other reason why a country that 
gets an unfair loan from China would choose to pay them back?
    Mr. Herscowitz. So I would agree with you that the terms of 
the loans are extremely unfavorable and I think it's not only 
the terms of the loans unfavorable but they also lack 
transparency and we look at countries like Zambia and Angola 
and the significant amount of debt that they owe to the PRC. 
It's just absolutely debilitating and it prevents the countries 
as well from taking on additional debt and so it makes it 
challenging for us.
    It also leads into default on projects where their 
governments are guarantors and pushes them up against IMF debt.
    Mr. Sherman. So is the answer to simply urge these 
countries----
    Mr. Herscowitz. So the answer--my answer, though, is this 
would be a question for the Treasury Department and not for DFC 
to opine on something like this.
    Mr. Sherman. I look forward to taking that up and I look 
forward to our intel agencies briefing you as I certainly 
haven't--briefing us, as I know they haven't and in most--many 
cases exposing to the world the details of the incredible 
corruption that China pays for and supports while we do the 
opposite.
    It's time for the people of the world to understand that. I 
yield back.
    Chairman McCaul. The gentleman yields. The chair recognizes 
Mrs. Wagner.
    Mrs. Wagner. I thank you, Mr. Chairman, and I thank our 
witnesses for their service.
    Members of this committee were among the very first to 
sound the alarm bells on China's insidious Belt and Road 
Initiative, Xi Jinping's plan to extend China's influence 
across the globe through predatory investments, debt trap 
diplomacy. We have just talked about an outright bribery and 
coercion.
    China is no longer hiding the fact that it seeks to replace 
the United States of America as the world's dominant power. 
This would be an unmitigated disaster for human rights, 
international security, and global economic development.
    America's allies and partners are eager for the U.S. to 
demonstrate leadership and commitment, specifically seeking 
assurances that the U.S. will remain present and engaged in the 
long term as they work to limit their reliance on China.
    Assistant Secretary Venkataraman, how many Foreign 
Commercial Service officers do you have across Southeast Asia?
    Mr. Venkataraman. I do not have that exact number for you 
but I'd be happy to get that to you.
    Mrs. Wagner. The next question was going to be how many 
comparable PRC ministry of commerce staffers are in the same 
region?
    Mr. Venkataraman. I can tell you it's a lot more----
    Mrs. Wagner. OK. Well, that's good to know. I'd like to 
know how many we have and if there's a way to find a comparable 
number that represents that it's a lot more, you know, because 
the point is is the FSC's Southeast Asia presence--is it 
sufficient to help U.S. businesses compete with PRC entities? I 
assume the answer is no.
    Mr. Venkataraman. The short answer is no.
    Mrs. Wagner. Yes.
    Mr. Venkataraman. We--as you know, we--the President has 
put forward a budget that reflects expansion--excuse me, an 
expansion of the Foreign Commercial Service precisely for this 
reason and the Indo-Pacific is one area where we need to 
strengthen our presence to do a better job.
    Mrs. Wagner. If you could get us those numbers I'd 
appreciate it.
    Mr. Venkataraman. I sure will.
    Mrs. Wagner. Many Pacific Island countries are so small 
that they struggle to attract private sector investments in 
essential services like banking.
    Again, Assistant Secretary Venkataraman, are you concerned 
that Pacific Island countries will have no choice but to 
partner with Chinese entities to access, let's say, banking or 
IT, any other critical industries?
    Are you seeing any efforts from the U.S. businesses in the 
banking industry competing for bids in the Pacific Islands and 
how are you encouraging those efforts?
    Mr. Venkataraman. Thank you, Congresswoman, and I can tell 
you that I cannot speak directly to the banking industry but I 
will tell you I share your concern very much about American 
companies being present and visible in the Pacific Island 
countries and we are already taking steps to change that 
situation on the ground.
    We, in the past year, have added our first two permanent 
positions in the Pacific Island countries so that we have 
commerce representation on the ground. We are looking very 
closely at what additional representation might be required.
    Last September Secretary Raimondo also announced the 
launching of negotiations on bilateral MOUs with these 
countries so that we could strengthen the commercial 
partnerships and really work on setting the right conditions 
and creating these interagency frameworks where we can make 
sure that the conditions are right for American companies to go 
in and I would assume that would include the banking companies.
    Mrs. Wagner. OK. Well, as a followup, Assistant Secretary 
Venkataraman, in areas across the Pacific Island countries 
where there isn't a U.S. Global Markets office but there is a 
Chinese ministry of commerce, you know, what are we doing to 
mitigate the gap?
    And you said you've got the presence now of at least two. 
Is that right?
    Mr. Venkataraman. Yes. And, Congresswoman, I should say 
that while we are speaking about the presence of those two on 
the ground the Pacific Island countries are not in any way 
ignored by the Foreign Commercial Service.
    We do have a team out of Australia that does cover that 
region. So while they're not present in all of the Pacific 
Island countries those countries are very much part of our 
attention and particularly as we negotiate these MOUs they are 
top of mind.
    Mrs. Wagner. In 2018 China laid out an ambitious plan to 
extend the Belt and Road Initiative to the Arctic.
    Assistant Secretary Pyatt, how well has China's plan been 
able to--how well have they been able to implement this plan 
and is State tracking any PRC natural resource exploitation in 
the Arctic?
    Secretary Pyatt?
    Mr. Pyatt. Thank you for the question, Congresswoman.
    I should note, as I said in my statement, I was recently in 
Alaska and had the opportunity to talk with Governor Dunleavy 
and some of our mining companies active there about all that 
they are doing working with other Arctic States and dealing 
with both the challenges that that region is facing because of 
a changing climate but also with the opportunities and, in 
particular, the opportunities attached to the energy transition 
and the tremendous growth in demand for minerals that we're 
going to see as a result of that.
    I do not have any specifics for you know on your question--
--
    Mrs. Wagner. So you do not whether China's plan, which is 
very specific, to extend their Belt and Road Initiative into 
the Arctic--you do not know anything about that plan----
    Mr. Pyatt. No, I am--we are certainly conscious of the 
plan. That is why we have been engaged as forcefully and as 
systematically as we have been.
    Mrs. Wagner. And how is it that you've been engaged?
    Mr. Pyatt. For instance, our new consulate in Nuuk, the 
work that we have done with our Arctic partners.
    I was part of a conversation that Secretary Blinken's 
counselor, Counselor Chollet, led at the U.N. General Assembly 
with all of our partners in the Arctic Council other than 
Russia, of course, to talk about some of these issues and the 
opportunity that it represents.
    I think we're actually in relatively good shape in this 
area precisely because we have these partnerships, and if I can 
allude quickly, Congresswoman, to your question about the South 
Pacific islands as well.
    I think the United States' greatest strength in working on 
these issues and dealing with the challenge that China 
represents is the fact that we're not doing this alone. We're 
doing it with allies and partners.
    In the South Pacific we're working closely with Australia, 
with New Zealand----
    Mrs. Wagner. Yes. New Zealand--I'm very aware of that.
    Mr. Pyatt [continuing]. In the Arctic. We're doing it 
closely with our NATO allies, with Canada, of course and as I 
said with our State of Alaska.
    So we need to continue to invest in those kind of 
partnerships and that's how we deal with the challenge that 
China presents.
    Mrs. Wagner. I'm way over my time. I apologize to the chair 
and I yield back. Thank you.
    Chairman McCaul. The gentlelady yields. The chair 
recognizes Ms. Wild.
    Ms. Wild. Thank you, Mr. Chairman.
    I'd like to start with a question to Mr. Herscowitz. One of 
the--one aspect of the PRC's authoritarianism that I find 
particularly egregious and troubling is its use of forced labor 
and widespread labor violations, which I believe have been very 
well documented, and I think that one of the, hopefully, 
competitive advantages that we should have abroad is in 
contrasting that PRC record with our approach to not only 
affirmatively embracing worker safety and rights but also 
prioritizing hiring local workers, which my understanding is 
has not been something that the PRC has done, although I've 
also heard that perhaps they've started to hire more local 
workers, for instance, in Africa. I may be wrong about that.
    But you in your testimony write while the PRC often brings 
in its own labor force on projects, even having operations 
manuals written in Chinese, the projects we support create 
local jobs, bring more people into the formal economy, and 
train workers so they can build skills, all of which help 
promote economic opportunities and prevent migration or 
participation in illicit activities.
    Can you tell us a specific example of this approach and how 
it's been successful?
    Mr. Herscowitz. Sure. I'm glad that you brought up my old 
testimony because I was thinking that maybe they've been 
listening to my testimony and suddenly they're doing some 
window dressing and hiring some more local employees.
    I spent 6 years living on the African continent traveling 
to a significant number of the countries and I've been back to 
Africa, I think, four or five times this year and I always look 
at this issue and ask about this issue.
    To give you a specific example, I spoke in my--earlier 
about a project that we're going to be financing in Ecuador to 
build a port and that port alone will create about, I think, 
1,250 jobs.
    One of the things that's important to remember is that for 
U.S. companies in particular it's expensive to bring your own 
labor. So even I was--I explained to African countries, like, 
we're not trying to take over your local--we want to build 
skills. We want to have good partners.
    I visited a project in Burundi recently that DFC is 
participating in. It's a solar array. It's the first--it's like 
the largest provider of power in Burundi right now, one of the 
poorest countries in the world and I was really impressed. It's 
an American-Israeli company called Gigawatt Global. All of the 
people who worked at that solar array were local Africans.
    And so this is the model that people see and this is why 
they want more of it because we look to train and empower local 
staff.
    In fact, one of the things that we did early on with Power 
Africa is we created a program to train young women in Africa 
to power in leadership positions and we have watched how these 
women have gone into senior positions in utilities and 
elsewhere.
    So that's what we offer that the PRC does not. We offer the 
ability to have true partnerships, build capacity, and make 
sure that the people who are running the projects are in 
control of their own resources and building that mutual trust.
    Ms. Wild. OK. I'm going to stay with you because I want to 
get to another question and that is on the impact of failed BRI 
projects, some of which have very publicly failed and in some 
cases, like in Sri Lanka, the--their failures have even 
resulted in public backlash, as I understand it, against the 
Chinese government.
    We have continued to hear about infrastructure projects 
that have had construction problems, are financially 
unprofitable, and added to the host nation's debt burdens. What 
has been the result of those failed projects in terms of 
China's reputation at large and whether it's--and the growth or 
not of its influence in these countries?
    Mr. Herscowitz. So there are failed projects and a lot of 
it's anecdotal but a lot of it's real and I think there's been 
a lot published, for example, about the Coca Codo Dam project 
in Ecuador which has cracks in it.
    There's other hydro projects built by Sinohydro that have 
cracks in them and now governments need to fix them. Roads that 
are falling apart as well. Even the African Union building that 
the Chinese built had all kinds of issues with it.
    So everybody knows it and they laugh about it a little bit 
because they know that they're not getting the best quality and 
they want U.S. companies, and one of the projects--and I know I 
just spoke about Ecuador but I'll talk about it again.
    DFC recently approved a 200 megawatt solar project in 
Ecuador, which is a massive solar project for Latin America. 
Chile has got some really large solar but that's really huge 
for Ecuador and that's going to offer less expensive power and, 
in some ways, more reliable power than what you're getting from 
that hydro project. But there are quite a few out there that 
are problematic and it's causing significant reputational harm 
to the PRC.
    Ms. Wild. OK. Thank you very much. I yield back.
    Chairman McCaul. The gentlelady yields.
    The chair recognizes Ms. Radewagen.
    Ms. Radewagen. Thank you, Mr. Chairman.
    [Speaks foreign language.] Good afternoon. I want to thank 
you all for being here today.
    I want to focus on some of the loans that the PRC is making 
to small nations, and just following up on Mrs. Wagner's 
question about specific island nations and thank you for 
mentioning that.
    About a week and a half ago I was in independent Samoa and 
their airport was built using BRI funds. Now, when my good 
friend, Prime Minister Afioga Fiame Naomi Mata'afa was elected 
to lead independent Samoa she canceled many of these BRI 
projects in independent Samoa before they actually destroyed 
Samoa's economy.
    So Mr. Herscowitz, my first question is for you. There have 
been reports and trends that PRC investment into BRI is 
suffering due to their heavy saturation of loans. Has DFC 
outlined or explored any plans to capitalize on this 
opportunity? And if so, can you share some of the details?
    Mr. Herscowitz. So DFC is an important tool for the U.S. 
Government in trying to provide support in the Pacific Islands.
    It's a challenging place to work, as has been highlighted, 
because a lot of the economies are quite small and so we're 
even looking at how we can support some of the islands on a 
regional basis.
    I met with one of the ministers from Tuvalu recently at 
the--at the Least Developed Countries Conference and just 
talking about what we can do, and it's such a small population 
there and we're looking at if there were ways for us to support 
even the development banks in that country or at least a 
regional development bank.
    A significant project, though, and I think one of my 
colleagues mentioned that--it's been mentioned--our 
collaboration with partners who are very active in the region 
like Australia, like Japan, was the work that we have just done 
in Papua New Guinea to basically upgrade a 5G network, which 
outbid a Chinese bidder as well and that was collaboration with 
the Japanese government and Australian governments. We are 
constantly looking for these types of opportunities but there's 
always more we can all do.
    Ms. Radewagen. Thank you. And as a followup--and you can 
all answer but I may not have enough time--can any of you share 
all the current bids for strategic projects that are ports, 
undersea cables, and telecommunications systems?
    Mr. Herscowitz. I do not think we have that--do you have--I 
do not know if Commerce tracks this. One of the--go ahead. I'll 
defer to you first.
    Mr. Venkataraman. Yes. I cannot provide an answer on that 
right now. We'd be happy to look into it. We might have some 
information that's on point or at least gets us close to some 
of that information that our deal teams might be tracking. But 
we'd be happy to followup.
    Ms. Radewagen. OK. Mr. Secretary?
    Mr. Pyatt. So I think what I would highlight in this area 
in particular are the opportunities around new energy 
technologies, and as Andy pointed out, these are very small 
economies. Most of their power historically, as you know, has 
come from diesel generators systems that aren't very clean.
    But now the technology is evolving and so we're working 
with partners including both DFC but also with American 
companies. I should also point out that I was very pleased that 
earlier this year one of my deputies, our Deputy Assistant 
Secretary Laura Lochman, was in the Pacific Islands talking 
about exactly these issues of technological opportunity but 
also trying to build partnerships.
    Ms. Radewagen. Thank you, Mr. Chairman. I yield back the 
balance of my time.
    Chairman McCaul. The gentlelady yields back.
    The chair recognizes Mr. Schneider.
    Mr. Schneider. Thank you, Mr. Chairman. I want to thank the 
witnesses for sharing your perspective today.
    Assistant Secretary Pyatt, it's good to see you. I last saw 
you in Greece seems like forever ago. But it's good to be here.
    Obviously, what we're talking about is a critical issue and 
making sure the United States maintains its leadership role and 
are able to stand up against the BRI. I want to kind of walk 
through an intellectual exercise for a second, though.
    If there was no Belt and Road Initiative what would be our 
international priorities within the context of building 
relationships and assuring U.S. alliances?
    And maybe, Mr. Herscowitz, I'll start with you.
    Mr. Herscowitz. So I would start by saying that prior to 
the Belt and Road Initiative the U.S. Government has for a long 
time invested a significant amount in developing countries, 
going back to the Marshall Plan and doing it for the right 
reasons because we see developing countries as our partners and 
we see that it benefits Americans when the countries throughout 
the world are in a better place economically and that people 
are well educated, they have access to health care.
    So whether it was through USAID or OPIC or DFC the work 
that we have been doing has been building the partnerships that 
we have had and it's helped build the reputation of the United 
States to where it is internationally today.
    We can continue to do more but I would just submit that we 
would--we have been doing this work and we can do more and we 
can do it better.
    Mr. Schneider. Assistant Secretary Venkataraman?
    Mr. Venkataraman. I would just echo that to say that our 
focus even without Belt and Road would be on the emerging 
markets where that is the locus of economic growth. That is 
where U.S. business sees a significant opportunity. That's 
where the middle classes are growing and that's where we would 
be still.
    Mr. Schneider. And Assistant Secretary Pyatt?
    Mr. Pyatt. On the energy and climate issues that I'm 
responsible for, Congressman, much is guided by the priorities 
that Secretary Blinken has given us.
    The top of that list is the competition with our two great 
adversaries, the PRC and Russia, and then another critically 
important consideration, again, in the energy and climate space 
is the large developing countries that are going to have such a 
decisive impact on how successful we are in managing the 
climate crisis--so India, Pakistan, Bangladesh, Nigeria, where 
I'm traveling this weekend, Indonesia, these are of critical 
importance--and then also I would say influenced significantly 
by what we hear from Congress and the priorities that this 
committee and the Foreign Relations Committee give us in terms 
of areas of particular focus.
    Mr. Schneider. And I was looking at some of the numbers and 
the materials we had in preparing for this hearing and it 
struck me our direct investment--foreign direct investment of 
China over the 20 years, 2001 to 2021, grew from $34 billion to 
$2.6 trillion, a 76 times increment.
    The United States is still significantly larger. We're at 
$9.8 trillion FDI in 2021, four times China's, but our relative 
share of the global total has dropped from 32 to 23 percent.
    But I think one of our superpowers as a nation is our 
alliances--we have talked a little bit about this here--is our 
ability to bring others together. I think each of you have 
talked about this of how we--working with others and the 
relationships we build with the countries we partner with and 
the countries we're investing in.
    And the reason I asked about what if there was no Belt and 
Road I think there's overlap. Even if China wasn't doing what 
it was doing we would still be doing what we are doing because 
it serves our interests. It serves our national interest. Our 
strategic interests are served making sure that China does not 
continue to grow.
    In the minute we have left, and maybe I'll start with 
Assistant Secretary Pyatt, coming the other direction, what are 
the most important things? You mentioned the role or positions 
coming out of Congress.
    What do we have to make sure that we address and what do we 
need to say or do to make sure that you all are successful, 
that the United States continues to be successful on the global 
stage?
    Mr. Pyatt. So, Congressman, if I can just circle back to 
Ranking Member Meeks' point, and we had a powerful presentation 
yesterday to our Ambassadors, also from Senator Coons and 
Senator Graham, who talked a little bit from the Senate side, 
their perspectives on where the budget debate stands and the 
potential repercussions for the State Department's operational 
budget.
    And so I think giving us the resources that we need, and as 
I said earlier, I was so grateful to hear about the engagement 
with Ambassador Tamlyn in DRC, which is a critically important 
country in this energy transition game.
    But it's also an embassy that's operating right at the 
fringes in terms of their operational effectiveness for 
resource reasons.
    Mr. Schneider. Anybody else?
    Mr. Herscowitz. I just wanted to add that one of the most 
powerful changes that I thought took place when DFC was 
established in contrast with OPIC is opening up the ability for 
DFC to work not only with U.S. companies what that's done is 
it's opened the door for us to work with companies from--both 
local companies.
    From a development standpoint you build long-term 
sustainability but with like-minded partners as well and the 
reason why intuitively it seems like that does not favor U.S. 
companies it actually does because when we're in on a project 
early it gives us an opportunity to find out who the EPC 
contractor was going to be, who the vendors are going to be, so 
that we can then pass trade leads on to the Commerce Department 
so that U.S. companies can get in there.
    OPIC had a vast majority of its business with a relatively 
small number of companies. I'm really proud of the fact that 
over the last 3 years DFC has added at least, I think, 200 or 
so new clients and I think that's really making a big 
difference in terms of our collaboration with like-minded 
partners and making sure that the U.S. has some touch in terms 
of what's going on in countries.
    Mr. Schneider. Thank you. I do not want to take--I'm over 
time but if--with permission if you want to add anything or----
    Chairman McCaul. Very briefly.
    Mr. Schneider. OK.
    Chairman McCaul. We have a congressional baseball game 
tonight.
    Mr. Schneider. Thank you for the extra time and, Chairman 
McCaul, thank you for having this hearing. This as a critical 
issue that we need to stay united in a single voice here.
    Thank you very much.
    Chairman McCaul. The gentleman yields. The chair recognizes 
Mr. Davidson.
    Mr. Davidson. I thank the Chairman. I thank the witnesses I 
appreciate you guys being here and the work that you're at 
least supposed to focus on. Hopefully, we'll find 100 percent 
alignment.
    Does the Administration assess that our partners and allies 
in the Western Hemisphere are in alignment with the United 
States on the need to address the threats posed by China?
    Mr. Venkataraman. Thank you, Congressman. I think there are 
different perspectives throughout the hemisphere on this 
question. I think what we hear most often is that our trading 
partners will look to China for assistance with certain 
projects and for that investment that does come from China.
    But it is also the case that many of our trading partners 
in the region do understand some of the risks associated with 
that investment or with that----
    Mr. Davidson. I mean, it's great that they understand the 
risks but, nevertheless, they do not assess China as a 
significant threat. They're continuing to actually increase 
their ties with the United--with China and in some cases 
diminish their ties with the United States.
    I'm glad you recognize that and acknowledge it. I guess my 
concern is that the Administration seems OK with it and I'll 
point out that during a background press call on the Summit of 
the Americas a senior White House official said, quote, ``Any 
country that is investing in the economic prosperity, security, 
and social wellbeing of the countries of the region are 
advancing U.S. national security interests and are welcome as 
far as we're concerned.''
    That does not sound like there is a policy from the United 
States to counter China's influence. It seems like it's 
inviting it like, hey, I do not know. If you're going to invest 
and grow the economy here come on over.
    That's concerning. This official also quoted National 
Security Adviser Jake Sullivan, who said on a previous 
occasion, quote, ``We're not asking the countries of the region 
to choose between the United States and China.''
    Is it the policy of the Biden Administration to permit the 
Chinese Communist Party to expand their malign influence in the 
Western Hemisphere? Is that a policy position?
    Mr. Venkataraman. Congressman, I would just say that we 
spend every day pushing back on that. That was what we do with 
our American companies.
    We provide these governments in the region with an 
alternative to what is presented by China. So we are not in the 
business of standing back and letting China take over the 
Western Hemisphere with their investments.
    Mr. Davidson. Mr. Pyatt?
    Mr. Pyatt. Congressman, the policy of the United States is 
to invest, align, and compete and we're competing every single 
day with the PRC, including here in the Western Hemisphere.
    I mentioned earlier my travel recently to Guyana, a small 
developing country that has just discovered 11 billion barrels 
equivalent of oil and gas.
    The conversations I had there everybody used the phrase 
that China was a partner of necessity, not a partner of choice. 
There was great appreciation for the fact that I was there, the 
most senior U.S. official to go to that country in a long time.
    Mr. Davidson. Thank you. Mr. Herscowitz?
    Mr. Herscowitz. It's part of DFC's mandate, a key part of 
our mandate, to counter malign influence and to use private 
sector solutions to advance development and the strategic 
interests of the United States.
    Mr. Davidson. Is China's influence malign?
    Mr. Herscowitz. Absolutely.
    Mr. Davidson. All right. I'm glad we agree.
    This is encouraging, because some of the statements, as I 
said, lends credibility to the idea that the Biden 
Administration may not have a formal policy that's OK with the 
Chinese Communist Party growing their influence in the Central 
and South America and the Western Hemisphere.
    It's certainly happening. It is happening, right? I mean, 
China's influence in the region is growing, right? Does anyone 
disagree with that? Everyone agrees?
    So we're not succeeding, you know, so--you know, I'm 
concerned about that. I'll just close on natural resources. 
Control of national resources critical to maintain power and 
leverage and the People's Republic of China has choke points 
and limitations on some of these.
    You know, you mentioned Guyana but we're also concerned 
about rare earth minerals and, you know, maybe not quite rare 
earth, whether you're talking around the world--cobalt, 
lithium, the things that are going, frankly, out of the green 
new deal that the Biden ministration loves. They're driving 
investment into China, into areas that China has garnered 
market.
    So when you look inside the Western Hemisphere are our 
policies effectively allowing China's influence to grow or are 
we doing things to counter it?
    Mr. Pyatt. Congressman, we are working very hard to counter 
it, including with the Lithium Triangle countries that you 
alluded to, working with Argentina, working with Chile, working 
here in the--in the near neighborhood including, of course, 
with Mexico.
    So our intent is to respond to the opportunities that the 
energy transition represents and I would suggest to you, 
Congressman, that the growth in demand that we're seeing for 
those battery minerals is not coming so much because of any 
government's policy.
    It's becoming because of consumer choice and that's 
certainly what I hear when I talk to Ford or General Motors----
    Mr. Davidson. Interesting perspective. I yield my time.
    Chairman McCaul. The gentleman yields.
    The chair recognizes Mr. Castro.
    Mr. Castro. Thank you, Chairman. I thank all of you for 
your testimony today and for being with us.
    I've often said that the United States should engage in 
competition with China, when necessary prioritize our sources 
of strength at home and provide funding to countries that need 
our support.
    The United States has an opportunity to present ourselves 
as a viable and better partner for the realities many nations 
face. To succeed, the United States must regain confidence with 
other countries and discourage actions that undermine agreed 
norms.
    So, in other words, competition between the United States 
and China should be fair. China should be able to compete with 
the United States without cheating the world and the 
Development Finance Corporation is a critical tool for the 
United States, which I strongly support.
    But I would caution the Administration in tying the DFC too 
closely to U.S.-China competition, and we saw with the 
Millennium Challenge Corporation's experiences in Nepal and Sri 
Lanka. Giving the impression that our development efforts are 
intended to counter China paints a big target on the backs of 
our work and can be counterproductive.
    So for my questions, Mr. Herscowitz, you testified that the 
DFC is working on improving its overall capabilities and 
recognizing--organizing its structure to counter the Belt and 
Road Initiative.
    The DFC is first and foremost a development agency. I 
understand the pressures to finance projects that provide 
alternatives to the PRC but in doing so the DFC cannot lose 
sight of the development mandate that the law requires.
    How do you view your role as the chief development officer 
in ensuring the DFC does not lose sight of its development 
mandate?
    Mr. Herscowitz. So let me start by saying that I'm really 
pleased of the direction that DFC has taken and the progress 
that it's made over the last few years in terms of making sure 
that every single project that we do is evaluated for its 
development impact, and development impact and strategic 
interest tend to be mutually reinforcing as well.
    And so when we look at every project it's evaluated using a 
system that gives it different values, depending on how many 
people are going to benefit, whether it's innovative, whether 
it's to promote economic growth.
    It happens with every single project and I've watched the 
quality of those projects from a development standpoint 
increasingly improve. I see us reaching into areas that are 
tougher places to work.
    I view DFC's mandate to be, yes, to counter influence of 
PRC and other malign influence but it's also to make sure that 
we're reaching some of the most underserved populations.
    And why is that important? Why do countries swing back and 
forth from left and right in Latin America? I spent 12 years 
living in Latin America. I've lived in South America, Central 
America. I've lived in Nicaragua. I've lived in the Caribbean.
    Why do they do it? Because they're not necessarily catering 
to the populations who are underserved who vote for their 
presidents and as they see that they are left behind they 
continue to vote in the other direction and that's just basic 
politics.
    And so what DFC is doing is looking at how we can reach the 
underserved populations in a lot of these countries, whether 
it's indigenous groups or Afro-descendant populations in South 
America, to make sure that we see greater stability and that 
people get jobs and we're not dealing with as many people who 
want to migrate across the border to the U.S.
    Creating jobs and making sure that people are happy where 
they are is what creates stable----
    Mr. Castro. Sure----
    Mr. Herscowitz [continuing]. For us.
    Mr. Castro. No, and I'm encouraged to hear that. I'm 
encouraged with many of the projects that DFC has taken on. But 
I just want to reiterate that the main mission of the DFC is 
not to be reactionary to China.
    That's not the main mission of the DFC, and the danger 
there is that we start following what China does and only 
investing in countries where China is making a play, so to 
speak, and I do not want us to get to that point.
    But let me--let me move on to my second question. During 
the last Congress I led an effort with my colleagues on this 
committee to change how equity appropriations to the DFC are 
scored so we can treat equity appropriations fairly and unlock 
more resources.
    I was glad to see this proposal raised by Secretary Blinken 
at the budget hearing earlier this year. What would changing 
how equity appropriations are treated do to help the United 
States' development priorities and provide alternatives to PRC 
financing?
    Mr. Herscowitz. I think most people in this room agree that 
the equity authority that was given to DFC was a great new 
authority but that we haven't been able to deploy it for 
reasons that nobody anticipated and that has to do with how 
equity is scored, which means that when we make an equity 
investment it gets treated as if it's a grant. It's assuming 
that we're going to lose all that money and everybody knows 
that's not the case.
    When you make an equity investment often you get the 
greatest return of any type of investment. Solving this issue 
is going to--would have would have a dramatic impact.
    First of all, it will allow us to get involved in--and I'm 
going to mention the strategic first--strategic projects where 
there's a lot of risk, whether it's mining or geothermal 
projects.
    There's a lot of up front sunken costs where people do not 
want to give them loans and you need to be able to get that 
equity in there and demonstrate some success over time.
    But it's also designed to help reach those small 
businesses, those entrepreneurs who have the good ideas, who 
cannot go to a bank right away and if you can give a----
    Mr. Castro. Sure.
    Mr. Herscowitz [continuing]. Full amount of equity to them 
that helps them grow their business.
    Mr. Castro. I apologize. I've run out of time. I know that 
people want to ask their questions. But thank you so much for 
your answers. I yield back.
    Chairman McCaul. The gentleman yields.
    The chair recognizes Mr. Hill.
    Mr. Hill. Mr. Chairman, thank you for holding this hearing, 
and it certainly echoes the work we do over on House Financial 
Services Committee as well in trying to strategize and work 
collectively with our friends here on the House Foreign Affairs 
on countering Belt and Road and one of the key things is China 
not being a member of the Paris Club is just not an acceptable 
reality.
    We need those of you engaged at--in the Foreign Commercial 
Service and at State advocating that in the interagency to 
really press the U.S. to press China to join the Paris Club for 
debt restructuring so we have fewer Ecuadors, fewer Sri Lankas, 
fewer catastrophic situations.
    I do not want to belabor that fact but we know about the 
predatory loan process of China. We know about their lack of 
transparent lending, their predatory terms, and all these 
things are things that this Congress have been active on.
    My Chinese Debt Transparency Act was signed into law in 
2020. Young Kim's bill, PRC Is Not a Developing Country Act, 
passed the House in March. So we are taking actions to counter 
this.
    But we need to build a consensus within the U.S. 
Government, American business, and our allies and partners 
around the world on how best to counter it, and on the House 
Intelligence Committee I work--in my area of geography I work 
in Africa and I was on a CODEL to the Republic of Congo in 2017 
And everywhere we went in that little place--corner of the 
world, where we only have 14 people in our embassy, by the way, 
you see millions of dollars' worth of Chinese construction.
    They built elaborate concrete bridges, freeways, sporting 
complexes, and even the Presidential palace and the foreign 
ministry building, and we were directed, oh, go up this 
beautiful highway and we did.
    We drove this highway. It goes to this major new Chinese-
built construction project of our community college and we come 
to the end of the road because the road is just purely a 
Potemkin Village fake concrete freeway and it goes to this 
beautiful campus.
    From the distance you see these white buildings on the 
green hillside and guess what? It's--there's nothing there. 
They're just empty concrete buildings built by China. There are 
no students. There's no teachers. There's nothing.
    There's not even a Chinese restaurant in the country. I 
mean, they left nothing except deteriorating concrete that as 
you know you would not have in any way, shape, or form.
    So in addition to predatory terms of Belt and Road the 
construction techniques are bad. So what are we doing to--with 
countries in the Global South to inform them?
    What are you doing in your daily work to inform the 
countries in the Global South about the dangers of financing 
things from China and using Chinese construction companies?
    Who wants to start on that?
    Mr. Pyatt. Congressman, I can start with that one and just 
to say both in my former Ambassadorial role but also knowing 
what my colleagues around the world are doing one of our most 
powerful weapons on that kind of advocacy that you've described 
are our Ambassadors who are on the ground every single day 
making exactly that point and bringing to the table the better 
offer that Secretary Blinken talks about all the time.
    And thank you for raising the debt issue, and I would cite 
an example right next door to where you were in DRC in Zambia, 
a reforming government that has not been able to extract 
concessions from the PRC on its debt overhang.
    And if you will excuse one more example from Guyana, which 
I mentioned to Congressman Davidson just a minute ago, when I 
was in--when I was in Georgetown there too you have an airport 
that was built by the Chinese.
    It was so shoddy that the president actually went out to 
the airport and was pointing out all of the defective air 
conditioning and jetways and other problems. They also built 
the building that the parliament meets in.
    So we have an adversary there. But I was also very 
encouraged because today it's Bechtel that's developing the 
construction plans for the new highways and the new ports and 
the new--the new waterfront.
    Mr. Hill. Thank you.
    Let me, in my remaining time, do all of you support an all 
of the above energy strategy for financing by U.S. Government 
financing arms? Yes or no--do you support nuclear financing?
    Mr. Herscowitz. Yes.
    Mr. Hill. Do you support oil and gas finance?
    Mr. Herscowitz. We support whatever project is appropriate 
for the situation in a country and that's what we look at. We 
are market driven and we're financing fossil fuel projects.
    We're looking at nuclear--we changed our nuclear policy. 
We're looking at nuclear policy. We also look at geothermal, 
solar, hydro----
    Mr. Hill. Sure. I'm not saying look----
    Mr. Herscowitz [continuing]. Looking at--we look at----
    Mr. Hill. So you support an all of the above energy 
strategy for multilateral assets of the U.S., how we 
participate in the----
    Mr. Herscowitz. So for us we're generally supporting, you 
know, IPP--you know, independent power projects. So we look at 
whether this project is going to be commercially viable and 
whether it makes the most sense for the country. So we financed 
a gas project in Sierra Leone just 2 years----
    Mr. Hill. Thank you. If you have other thoughts on that I'd 
like you to respond in writing. And my time's expired and I 
thank the chairman for his largesse.
    Chairman McCaul. The gentleman yields.
    The chair recognizes Mr. Jackson.
    Mr. Jackson of Illinois. Thank you, Mr. Chairman. Thank you 
for your testimoneys this afternoon.
    In light of the potential Fiscal Year 2024 operations bill, 
if there are cuts--draconian cuts to our foreign assistance by 
$18 billion--30 percent--can you share with me how that will 
affect your outlook and what challenges we'll be confronting in 
your operations in Africa?
    Mr. Pyatt. Congressman, I'll just say we have just begun 
that conversation at the State Department but there will be a 
severe impact including a negative impact on our ability to 
engage in the competition with China that we have been talking 
about this afternoon.
    Mr. Jackson of Illinois. Can you be specific in which 
regions? If we had to look at a 30 percent cut where would we 
divest ourselves of, where would we concentrate, reallocate our 
resources in light of the potential cut?
    This is on the table now. This is realistic that it's being 
proposed to have a 30 percent cut.
    Mr. Pyatt. Congressman, as far as I know, on the State 
Department side we have not begun that rack and stack exercise.
    But as I mentioned earlier, we had a presentation yesterday 
from Senator Coons and Senator Graham, which made very clear 
that this would--be this would have a significant impact on the 
effectiveness of our diplomacy.
    Mr. Jackson of Illinois. Thank you. Would anyone else like 
to comment?
    Mr. Venkataraman. Thank you, Congressman. I would just say 
that we do not have a specific answer for you on that point but 
I do know that that is something we'd have to consult very 
closely with our colleagues at the State Department, in 
particular with respect to the operations of our foreign field.
    Mr. Herscowitz. In terms of DFC, any reduction in our 
budget is going to impact our ability to make investments. It's 
going to impact our ability to have more people overseas and to 
invest overseas as well. So it will have--any reduction will 
have a direct impact.
    Mr. Jackson of Illinois. Thank you so much.
    So as we are talking about as their influence grows and we 
are entertaining the possibility of reducing our ability to 
give you funding, let's think of a blue sky. What would you 
like to see the funding level increase to to give you all the 
tools and support that you need to attract U.S. business?
    And from my personal travels in Africa and experience they 
would love to do business with Americans but we haven't 
extended the hand, shall we say.
    They've not been a priority and under the previous 
Administration we did not fund the embassies, we did not staff 
them, and many people in the continent were left with no other 
choice. How do we make up time and lost ground?
    Mr. Pyatt. So, Congressman, I'll--thank you for that 
question and I'll give you a specific response in the case of 
the State Department and the ENR Bureau.
    The President's budget proposal includes $35.5 million for 
programs in the area of critical minerals and our ability to 
compete in that space, and a lot of that resource would go to 
Africa because that's where so many of the minerals are.
    Mr. Jackson of Illinois. Anyone else like to comment?
    Thank you. I yield back my time, Mr. Chairman.
    Chairman McCaul. The gentleman yields back.
    The chair recognizes Mr. Baird.
    Mr. Baird. Thank you, Mr. Chairman, and thank the witnesses 
for being here today. Appreciate your comments.
    You know, the CCP's Belt and Road, and we have been talking 
about that all evening, has led to a tremendous amount of 
Chinese influence in Africa, including the countries of Kenya, 
Namibia, Zimbabwe, Mozambique, Congo, and many more.
    So the Chinese have made it clear that Africa is a key part 
of their BRI and they leverage investments backed by collateral 
and commitments that is implemented in such a way that it's 
almost impossible to repay and, you know, this impacts American 
agriculture and American production because what they are doing 
in these countries is trying to gain access to the land and the 
production of food and so that impacts the American 
agriculture.
    And on top of that, they have built four military ports in 
2022 and they did not have any in 2021. So this is an obvious 
attempt for China to expand its military presence. So my 
question is this.
    Eight out of 10 of these countries that are afforded the 
highest levels of Chinese diplomatic partnerships are eligible 
for AGOA--the African Growth Opportunity Act.
    So my question is what is it--what are we doing, what's the 
Administration doing, to effectively counter Chinese 
involvement with these countries that have duty-free access to 
the U.S. market?
    Mr. Venkataraman. Thank you, Congressman. I know that the 
Administration is taking a very close look at AGOA but that is 
a question that I would defer to my colleagues at USTR.
    Mr. Herscowitz. One of the most important things that DFC 
has been doing, in my opinion, has been the growth of its food 
security and agriculture portfolio. When I arrived at DFC a few 
years ago we had very, very few deals.
    We have now grown our portfolio to be doing almost a 
billion dollars of transactions that have been approved in the 
last 3 years and most of those transactions are benefiting 
smallholder farmers.
    I mean, when you have smallholder farmers who are getting 
access to credit it puts them in a position also to push back 
on the influence of others who are going to come and try to buy 
their land.
    So I'm actually really quite proud of the work that DFC has 
been doing to support smallholder farmers throughout Africa and 
all over the world.
    Mr. Baird. Anyone else?
    My next question then focuses on the digital Silk Road and, 
you know, China's involvement in Africa that Huawei has got, 
what, 70 percent of the 4G network. And so I think it's 
important that we counteract some of their activities there.
    So I just ask how the department is monitoring the supply 
chain to ensure that American components do not end up in 
products which ultimately end up used to spy on African 
citizens.
    Mr. Pyatt. Congressman, maybe I'll take that one and again 
refer back to my experience as a chief of mission overseas and 
the work that we did during the Trump Administration to really 
raise consciousness regarding the vulnerabilities that some of 
Huawei's 5G systems bring along and the ability that our 
embassies overseas have had to bring in the technical experts 
who could have the conversations with the intelligence 
counterparts, with the telecommunications executives.
    But it also comes back to the point of having a competitive 
alternative product and it's not in my ENR responsibilities 
today.
    But I am quite aware that there's significant effort across 
the U.S. Government to figure out how we bring American and 
Western alternatives to the table to compete, including in this 
space around advanced telecommunications.
    Mr. Herscowitz. So I just wanted to add that while the PRC 
is extremely competitive with Huawei and that type of 
equipment, which is problematic for us, I mentioned the project 
that we supported working with the Australians and the Japanese 
and Papua New Guinea.
    We did a project in Brazil, the Smart Rio Transaction, 
where we're helping build out smart cities that'll provide some 
level of digitization and wifi access using non-PRC equipment.
    And then we're doing a lot of work with data centers as 
well. In Africa, we'd provide a $300 million loan to Africa 
data centers because where you store all that data it's 
increasingly important that that's secure in a way. And so 
that's another area of growth for DFC.
    Mr. Baird. Thank you, and my time is up. So thank you, Mr. 
Chairman. I yield back.
    Chairman McCaul. The gentleman yields.
    The chair recognizes Mr. Keating.
    Mr. Keating. Thank you, Mr. Chairman. I'd like to thank our 
witnesses for their patience, going through all those roll 
calls and waiting here and still here to provide us some 
insight. I really appreciate that.
    There's been--this has gone over before in some respects 
but I think it's important to emphasize too I agree with the 
comments before that we're not there the way that--when I 
talked to our allies and Africa in particular, talk to them, 
they said, you just--we want you to be our partners. You're not 
there.
    And but if we're going to put a--you know, if we're going 
to be there and we're going to put ourselves on the field you 
have to fund a team and I'm concerned about--and I do not think 
it's all the Republican members here but there are Republican 
proposals that went through that would have had the effect of 
22 percent budget cut on USAID, Commerce, State Department.
    And if you could briefly just say--the Chinese aren't 
cutting their investment by that amount in terms of doing 
this--that this really puts us at a competitive disadvantage 
that we have to deal with.
    So without going into too much detail that's a--that cut 
would really hamper what you're trying to do overall in 
continents like Africa and the countries there, correct?
    Mr. Pyatt. Severely.
    Mr. Keating. Yes, and I think that's--if we're going to be 
competitive we have to fund the team on the ground.
    But we do have advantages. You know, the Chinese with their 
plans, besides the predatory loans, promises of local 
employment and then bringing in their own people, in the macro 
sense they're coming out with a lot of profits out of this.
    They are in effect taking the rare earth, the minerals, 
shipping them, and the rest of the processing is being done 
elsewhere. So, in effect, they're probably leaving those 
countries with 20 percent of the profit they could get.
    The U.S., on the other hand, with the efforts that you're 
working on we want to really try and encourage growth in the 
country so these other types of manufacturing, these other 
kinds of processing, the other parts of their economy will 
benefit and they could probably get, like, 80 percent instead 
of 20 percent.
    So we're going to be successful if we have the tools to do 
it, I believe, and we should never forget that. China has 
certain advantages but so do we and I think we're dealing from 
a stronger position and, hopefully, we'll take advantage of 
that.
    The biggest advantage we have among the fact that we view 
the ability of them to profit better themselves as countries 
and benefit their own people is the fact that we have something 
the Chinese do not have.
    We have a coalition and we're seeing the coalition in play 
now in the military sense in Europe. We're seeing it expand 
beyond Europe, over 50 countries with our involvement Ukraine.
    The Chinese do not have that. So if you could briefly--the 
importance of teaming up, particularly with the EU because with 
the EU and the U.S. together that's over half the world's GDP.
    Instead of sanctioning China, instead of trying to compete 
with them in a micro sense, we should be dealing with strength 
and that's our greatest strength, together with our own shared 
values.
    Do you want to comment on that?
    Mr. Pyatt. So, Congressman, you really delivered my talking 
points in so many ways in that presentation but just let me 
highlight your last one in particular, which is the advantage 
that we have in terms of our ability to build coalitions.
    That's exactly what we are doing through the Minerals 
Security Partnership--12 other countries plus the European 
Union--and it's not just--it's not just Europeans. It's Japan. 
It's Korea. It's Australia. It's Canada.
    So these are all countries that bring to the table the 
values that we hold in common and, in fact, the first thing 
that we agreed on as an MSP coalition are a set of environment, 
social, and governance standards. Those ESGs are public. 
They're on the internet.
    But we're also agreed to work together to bring together 
the resources of our development finance institutions and then 
also to mobilize our private sectors, and I'm not sure if you 
were here when I made the point earlier that when we started 
the MSP with Secretary Blinken and Reta Jo Lewis----
    Mr. Keating. I was. I'm running out of time.
    Mr. Pyatt. Yes. So I'll stop there.
    Mr. Keating. Three hundred percent. But the other thing is 
the State Department are working for a rule of law, stability. 
That's what's going to encourage private investment. They're 
going to want those things in place if they're going to invest 
private funds.
    Last, just--if you can get time for a response, perhaps, 
but an observation that's important now with Russia's illegal 
war in Ukraine, this war will be over someday.
    Ukraine will have the second strongest military probably in 
Europe. The work we do in State there is going to be so 
critical in terms of having them--have a country with a civil 
strength, a rule of law, going forward.
    In the absence of that Chinese said they're prepared to 
invest in reconstruction after the war is over. We have to be 
there first.
    Do you think that those statements attributed to some 
Chinese officials that they will be prepared to come in after 
the war is over and invest in that reconstruction presents a 
real challenge?
    Mr. Pyatt. So, Congressman, we could have a whole separate 
hearing on this. As you know, I was Ambassador in Ukraine from 
2013 to 2016. I'm enormously proud of the role the U.S. has 
played and I, having spoken with the prime minister, deputy 
prime minister, the United States is the preferred partner by 
far in the reconstruction process and we will talk about that 
with our allies and partners next week on Tuesday and Wednesday 
when I join Secretary Blinken at the London Ukraine Recovery 
Conference.
    Mr. Keating. Thank you all for your service. I yield back.
    Chairman McCaul. The gentleman yields.
    Let me just say that we are working on a bill that would 
use frozen Russian Federation assets to help fund the 
reconstruction.
    So with that, the chair recognizes Mr. Mast.
    Mr. Mast. Thank you, Chairman. I'd just start by, No. 1, 
saying I think it's naive to think that China's just building 
cheap things to put people in their pocket. I consider this 
much more long term.
    I think they're looking to recreate the road system. Where 
they did not have inroads they're creating roads, whether it be 
through China and Pakistan or through Sri Lanka or to many 
places in Europe.
    This for the long term. They're looking to be embedded into 
resource countries because that is what they do. They export a 
tremendous amount of refined goods, of value added goods, and 
for the long term to do that they need those resource countries 
feeding them. They're not trying to do something to say, hey, 
we're going to get you for a couple of years.
    So in that, let me ask you all a question. What--the 
various MOUs that these countries have signed across the Belt 
and Road Initiative what countries have you seen leave the Belt 
and Road Initiative after their MOUs expired?
    Mr. Pyatt. So, Congressman, one example is in Europe with 
the 17+1, which last time I checked I think is the 14+1 and 
it's on the way to becoming the none plus one.
    Mr. Mast. Which ones? Which countries?
    Mr. Pyatt. I'll have to get back to you on that. I do not 
want to give you the wrong data. But----
    Mr. Mast. What do you think they are? This is important 
information. Which ones do you think they are?
    Mr. Pyatt. So 17+1 was a corridor of countries up and down 
Central and Eastern Europe and a series of the 17+1 partners 
have basically decided this is not a profitable avenue that 
they want to pursue, in part because of a lot of consistent 
diplomacy by American and other officials saying this is 
inconsistent with our values and interests.
    Mr. Mast. Yes. Let's continue on that in part. What 
countries do you see joining in 2023?
    Mr. Pyatt. I hope zero.
    Mr. Mast. But I'm asking for a real assessment, not a hope.
    Mr. Pyatt. What are the--Congressman, if you're asking what 
are the places where I think we need to----
    Mr. Mast. I'm asking specifically what countries do you 
think join in 2023 specifically?
    Mr. Pyatt. So let me--Congressman, let me try to be 
responsive in this way. I would cite an example of Pakistan, a 
country highly vulnerable because of years of indebtedness to 
China and a country which is looking for engagement including 
from the DFC or DFC----
    Mr. Mast. Doesn't Pakistan already have an MOU?
    Mr. Pyatt. Yes, they do and they have a--they have a port, 
which is not producing value for them, which the Chinese have 
constructed. They also have those roads that you described.
    Mr. Mast. So who are they adding in 1923. Pakistan is 
already on the list.
    Mr. Pyatt. As I said, I think the--our goal would be that 
that universe continues to shrink as it is shrinking in the 
reduction of the 17+1.
    Mr. Mast. Can you tell me--I want to dig a little bit into 
some of these MOUs--which ones do you worry about being able to 
be weaponized?
    They build a port, they build a train, they build a road, 
they build tremendous amount of infrastructure projects, you 
know, thousands, literally. Which one of those do you believe 
can be weaponized, are you most concerned about being 
weaponized, being able to translate to military capabilities?
    Mr. Pyatt. When I was Ambassador in Greece I was very 
concerned about the PRC presence in the Port of Piraeus in 
particular because of the critical role that NSA Naval Base 
Souda Bay plays as part of our military force projection 
platform in the eastern Mediterranean and also because the 
vulnerabilities that Greece was suffering from when I arrived 
as a heavily indebted country that nearly fell out of the 
Eurozone.
    We dealt with that including in partnership with the DFC 
but also with a lot of persistent American diplomacy, working 
in lockstep with our European allies.
    Mr. Mast. Let me ask a reform question and this is, of 
course, open to any of you all. This has been open to any of 
you. Anything that I ask that you have an answer to that I did 
not get an answer to please feel free to chime in.
    Do you think that we should be encouraging reform at the 
IMF or the World Bank to respond better to the way China is 
getting countries to participate in the Belt and Road?
    There's fundamentally different approaches between the way 
the IMF and the World Bank approach building infrastructure and 
how China. Do you think there should be reformed within the IMF 
and the World Bank?
    Mr. Pyatt. Congressman, this is really a U.S. Treasury 
issue. But I will just say I have heard Secretary Yellen speak 
eloquently about the need for reform at the MDBs.
    Mr. Mast. OK.
    Mr. Venkataraman. Congressman, I would just--I would just 
add, the one area of reform I would highlight is in the World 
Bank where we have been working very closely with them to 
change their approach to infrastructure development.
    Mr. Mast. Give us those changes before my time ends, 
please.
    Mr. Venkataraman. Yes. So particularly with respect to 
factoring in the life cycle cost for infrastructure projects so 
that it's not just based on lowest cost but it's based on an 
overall cost, which is what creates better advantage for 
American companies.
    Mr. Mast. Thank you for the time, Chairman.
    Chairman McCaul. The gentleman yields.
    The chair recognizes Ms. Manning.
    Ms. Manning. Thank you, Mr. Chairman, and thank you to our 
witnesses for your patience in staying with us today.
    Ambassador Pyatt, our colleges and universities are among 
our greatest assets in our strategic competition with China, 
helping us win hearts and minds by bringing talented young 
people from around the world to study in the U.S., and not only 
do we educate them but they learn our culture. They make 
friends. They build lifelong ties to our country and our way of 
life.
    Yet, I was recently on a CODEL to Japan, an ally that has 
now increasing importance in light of China's military 
aggression, and we learned that Japanese students are no longer 
coming to the U.S. to go to school for a variety of reasons, 
including the high cost of our colleges and our universities.
    What steps is the Administration taking to encourage more 
foreign students to choose to study in the U.S. instead of 
China?
    Mr. Pyatt. So, Congresswoman, this one also is out of my 
ENR lane but it's very much in my role as a U.S. Ambassador 
that I had in the past. I am a--I agree with you completely.
    I am a huge fan of every cent that we invest in our 
educational partnerships. I think the Fulbright program is one 
of the most lucrative developments that the U.S. has ever 
committed to in terms of how we build partnerships around the 
world because you're investing in future generations.
    I know that all of my colleagues at the State Department 
today who work on these issues are critically focused on 
continuing to open these opportunities in the United States and 
I also know, because I've been part of the preparations for 
Prime Minister Modi's visit, that we will use that visit as 
well to highlight the tremendous example that India provides of 
a country that's sending lots of students to the United States.
    I would also say as a parent who's finished paying for 
university for two children and then as somebody who's watched 
the role of international education that I see tremendous value 
also having more American students be given the opportunity to 
study overseas.
    Ms. Manning. Since you brought up the issue of India, I 
wonder if you can comment on whether it's become more difficult 
for students who study at our colleges to get immigration visas 
to stay and work in the U.S. after they graduate. Do you think 
this is a disincentive for foreign students to come to the 
U.S.?
    Mr. Pyatt. Congresswoman, I'm going to--I'm going to punt 
that one to my colleagues in the SCA bureau who work on these 
issues every single day.
    But I do know, and on this I can speak for Secretary 
Blinken and the rest of the Administration, there is a very, 
very strong commitment to continuing to build those educational 
partnerships because they contribute to American economic 
competitiveness.
    Ms. Manning. Thank you.
    Mr. Herscowitz, how can DFC help provide financing to more 
companies that offer loans to help foreign students study at 
our colleges and universities?
    Mr. Herscowitz. So DFC actually has some active projects 
that provide loans to help people finance graduate education, 
including in the United States. So this is a--we have existing 
projects in that regard.
    We have to be careful, obviously, that we're not giving 
opportunities to people that we might not otherwise provide to 
Americans as well.
    So we're very careful about when we do these types of 
projects to make sure that they're targeting the right 
populations of people who also with the ultimate goal of coming 
back to their home country so that they're going to help 
develop the local expertise and we do not promote a brain drain 
in those countries.
    Ms. Manning. OK. Understood.
    Ambassador Pyatt, what is the State Department doing to 
help other countries take steps to guard against China's 
growing influence over foreign think tanks, academia, Confucius 
Institutes, and media outlets?
    Mr. Pyatt. So, again, Congressman--Congresswoman, this is 
one where I will speak in my capacity as a former Ambassador 
because I dealt with exactly these issues in Greece where we 
worked very hard, including private conversations that I had 
with senior university leaders, raising the concerns that we 
had around some of the Confucius Institutes and the way in 
which the Chinese--the PRC embassy was seeking to some extent 
to limit academic freedom.
    It's a core principle of the United States, the open 
exchange of ideas, but we want to compete on a level playing 
field. It's exactly the same principle that applies to the 
economic and commercial issues that all of us work on.
    Ms. Manning. Thank you. I have more questions but we have a 
baseball game to get to. So I yield back.
    Chairman McCaul. Thanks for reminding us. The gentlelady 
yields.
    The chair recognizes Mr. Mills.
    Mr. Mills. Thank you so much, Mr. Chairman.
    So I wanted to go through my understanding of the Belt and 
Road Initiative. It's something that I had written on for many 
years and I've published, you know, dozens of articles on the 
ideas of the--also the geopolitical alignments that are 
involved in this when we talk about Russia, China, Iran, and 
North Korea and what their overarching goal is, which we know 
is to eliminate the U.S. dollar as a global currency.
    But we're seeing where we have already got an expansion of 
Eurasia, which is one of the key elements that they were 
looking for, that they're continuing to try and utilize the 
proxy of Russia to be able to try and advance for them.
    You already have a tremendous amount of growth when it 
comes to Africa and the economic coercion that was undermining 
a lot of the U.S. security cooperations and others, and then 
you see the continual strengthening in Oceania, which is really 
an idea of trying to choke off Western Hemisphere supply chain.
    And then that marriage of convenience that they currently 
have we know helps them a lot in our own hemisphere when we 
talk about the Chavez of Venezuela, when we talk about Petro in 
Colombia, when we talk about that Russian involvement as we--as 
I mentioned.
    But they also have now Panama and Honduras whereby they're 
going to continue to utilize these relationships to potentially 
look at the promotion of increased taxes, tariffs, and 
passageway when it comes to the canal.
    So there's almost an encirclement attempt with conjunction 
of further type of malign activity regarding WHO and WF and how 
they utilize those but also attacking the petro dollar with 
OPEC to try and see if they can supplement it and/or replace 
it.
    And so when you know that these are a lot of the 
strategies--and we have been in an economic resource and cyber-
based warfare with China for quite a long time.
    We continue to try and refer to it as competition, which is 
why it kind of disturbs me slightly when I hear something like 
what you Stated earlier about Sullivan saying that we should 
derisk and not decouple because I do think that we do have 
opportunities to be able to not only protect America and get 
back control of our economic and supply chain capabilities but 
also to really thrust China into an economic collision because 
if you look they're in a far worse position than we are when it 
comes to debt. They just aren't allowing their valuations to be 
properly audited that would actually disclose a lot of these 
things.
    And so, you know, I'm concerned with a lot of the things 
that we're doing that does not seem to be in line with us 
actually trying to save America and more on a China first 
agenda when it comes to this Administration when we talk about 
the significant importance of energy dominance and, meanwhile, 
one of the first things that was done was to cut the Keystone 
XL pipeline.
    You know, when we talk about the ideas of economic warfare 
and yet we haven't recognized yet that it's not the dollar or 
the baht or the dinar or the ruble. The common global currency 
is energy and I'm just not seeing where this Administration is 
really grasping that understanding.
    Now, I would argue that we have a lot of things and 
Chairman Xi has said it himself, that he can outpace us 
militarily and economically, but his biggest fear is America's 
innovation and I think that we have opportunities, as we all 
know, to advance ourselves and almost treat the quantum race 
the same way that Reagan treated the space race when it came to 
helping to bankrupt, again, looking at the ideas of quantum 
entanglement, AI autonomous drone capabilities, but also the 
ideas that we know they control 15 of the 16 rare earth mineral 
mines.
    But we do not even explore the ideas of subsurface 
harvesting where you actually have the ability to take the 100 
percent manganese control out of Chinese hands by actually 
utilizing that at the 10,000-to 12,000-meter depth levels, 
something we have the capability of doing but also would 
refocus China's attention.
    Because if we decouple--the way to hurt China, because they 
want to get into a nonkinetic element of things. They do not 
want to go gun to gun with us. They want us to basically go 
ahead and collapse ourselves financially, which means that they 
essentially have won by not only buying up our lands and 
controlling the farmlands but controlling us and our behaviors.
    So I wanted to know whether or not we feel that energy 
dominance, getting to a point of reliable--not just the race 
for renewables where we buy a lot of the materials from China, 
and the ideas of subsurface harvesting, quantum race, and these 
types of elements where we understand that decoupling and 
hurting China economically is far, far more superior than 
anything else is something that you would agree with.
    Mr. Pyatt. So, Congressman, I said, I think, in the opening 
sentence of my statement that I see my job and ENR's role as to 
ensure that the United States continues to be the partner of 
choice around the world on issues of energy and energy 
security.
    We had that status during the fossil fuel era and we are 
now working as hard as we can to ensure that that remains the 
case. As we enter this era of technological change we see more 
work being done in areas ranging from small modular reactors to 
green hydrogen to geothermal to wind and solar and all the 
other technologies that will----
    Mr. Mills. Those are more renewables than were reliables. I 
mean, when we look at the actual impacts of things but also 
where the actual sources are originating. I mean, again, we 
know cobalt, nickel, and lithium, especially after we gave $1.1 
trillion in lithium to the Chinese with the handover of 
Afghanistan, does not work in our favor.
    But we do have LNG. We do have natural gas. We do have the 
ideas of drilling more and actually getting resource 
harvesting, and this cash diplomacy effort that the U.S.A.--
where we think we can buy our adversaries with $800 million or, 
you know, whatever the case may be for Pakistan and the others 
has shown not to work.
    But what has worked is the model that Germany and Russia 
have whereby you actually provided reliable cost effective 
energy sources and that gained a lot of alliances, especially 
for those countries that were moving away from their own 
productivities of coal and nuclear, et cetera.
    So I do not think that the strategy that we're utilizing--
if the idea is to understand that we're looking to try and be 
the prevented--prevent China's expansion actually get to a 
point of being the global dominant, I do not think the idea is 
trying to derisk our involvement but decouple away from the 
economic reliancy on China.
    And so I do not think that preventing clean energy 
dominance is necessarily the only mechanism. It's actually 
utilizing and supplying our own internal energy when it comes 
to oil and fossil fuels and the things that we need to be able 
to be dominant to the point where that's our recognized 
strengths.
    And so I'm sorry when I disagree with the solar power 
projects that majority of those isn't made in America, and 
we're not in competition with China. We're in economic resource 
warfare with China and we need to acknowledge that and stop 
trying to hide away from it.
    Thank you for the additional time, Mr. Chairman. With that, 
I yield back.
    Chairman McCaul. The gentleman yields back.
    The chair recognizes Mr. Moskowitz.
    Mr. Moskowitz. Thank you, Mr. Chairman.
    So about a month ago now I got back from Egypt, Italy, 
Israel, and Jordan with the Speaker of the House and we talked 
a lot about China and a number of these countries.
    We talked about the Belt and Road Initiative, and I have a 
specific question for you all but I want to--I want to build it 
up for a second.
    So, you know, we learned about, obviously, what China is 
trying to do in Egypt with China--with the Belt and Road 
Initiative in Italy. We talked about China and Israel's 
technology. We talked about how China is winning contracts 
through procurement, and as I was sitting and listening to all 
of these things and getting educated what I recognized is that 
one of the significant challenges we have in this fight with 
China is that the American people know none of us.
    They know none of it. They do not know that China is on its 
way to taking control of the African continent through 
whatever--through loans, through dollars, you know, through 5G, 
whatever which way.
    They do not--they do not know that we're starting to hear 
from countries that we cannot sell them weapons fast enough 
because either we cannot get them approved or we cannot get 
them manufactured and so, you know, China is an option.
    They do not know that when China--when the United States 
pulls back China comes in. They do not know that. They do not 
know that Chinese workers are around the world building 
projects in other countries.
    They have no idea, and you know how I know they have no 
idea? Because I had no idea until I started learning about it 
through this committee and through talking to other people.
    You do not--so what I want to ask you guys is as we have 
this huge debate in this country on whether we should pull back 
from the world how do we--how do you look at how we're going to 
get the American people to understand that every time we pull 
back China comes in and what that is going to result in in the 
future.
    And that's for all of you or any of you.
    Mr. Pyatt. So, Congressman, let me start out by just 
thanking you for raising the issue and pointing out the concern 
because I think there's a fundamental principle that I've 
learned over the course of my diplomatic career, which is that 
when the United States pulls out and isn't someplace bad things 
happen.
    We have learned that history over various--we have learned 
that lesson over various times in American history. I hope very 
much we will not have to learn it again and I think the burden 
is on all of us, whether in Congress, in the Administration.
    Mr. Moskowitz. I do not mean to interrupt but it's 
happening, though. It's happening. One of the--one of the 
issues we heard from the leaders in the Middle East is that 
Ukraine is very important.
    They're happy with our position. They're supporting our 
position. They understand the repercussions not just in Europe 
but other places if we were to leave that area and let Russia 
just take Ukraine.
    But they were deeply concerned that while we were, you 
know, asking them not to, you know, listen to the Chinese they 
were deeply concerned that we're taking our eye off the ball in 
Africa or we're taking our eye off the ball in the Middle East 
because the United States is having problems of walking and 
chewing gum at the same time.
    Mr. Pyatt. So I would just say this is why Secretary 
Blinken is constantly reminding us to keep our focus on ROW--
the rest of the world--and I think especially in an environment 
where so many of the challenges to American security and the 
safety and security of American citizens are coming not only 
from countries now but from transnational challenges.
    Whether that is climate change, energy insecurity, 
pandemics and disease, food insecurity, all of these issues 
ripple across global markets.
    I'm glad to hear you were in Egypt because that's a perfect 
example of a country that's sort of a Petri dish for all of 
these different forces but which were the government is looking 
to engage with the United States and is looking for strong 
partnership.
    Mr. Moskowitz. Yet, every country we went to it was clear 
they would rather do business with us than China. It's not even 
close, right? It was unequivocal.
    But the subtext also was that if we cannot deliver they 
just cannot not--they cannot do--they cannot not just do 
anything. They got to buy weapons from somewhere. They got to 
get loans from somewhere.
    And so, you know, we're having this debate through Ukraine 
about isolationism. You know, we should spend our money here. 
We shouldn't spend it over there.
    And how do we get the American people to really understand 
that in this battle with China, right, that every time we're 
going to pull back or every time we're going to look a 
different direction that it's not just bad things are going to 
happen. We know that it's going to be China who comes in.
    How do we get the American people to understand that when 
we're--when we're talking about foreign policy? When that's not 
on MSNBC every night, it's not on Fox News every night, it's 
not on social media, how do we get them to understand this?
    Mr. Pyatt. So, Congressman, I guess the only lesson I would 
offer from my own diplomatic career is actually here in our 
pockets and it's this.
    It's the sense of connectivity that the technology 
revolution has brought and I think about, for instance, my own 
involvement with India, which goes back to 1992 and what 
happens when you have hundreds of millions of people who are 
suddenly connected globally.
    I'm a technology optimist--I think--and I think the United 
States will continue to lead the creation of value in that 
technology space.
    But we also have to recognize that we--our economy, our 
prosperity here at home, is more tied to the rest of the global 
system than it has ever been before.
    And, again, my portfolio working on energy, energy 
transition issues, dramatically illustrates this as the United 
States is now the largest gas exporter in the world, as the 
United States will remain a critical center of technological 
innovation on issues of energy, on issues of energy transition.
    Mr. Moskowitz. Thank you, Mr. Chairman. I yield back.
    Chairman McCaul. The gentleman yields.
    The chair recognizes Mrs. Kim.
    Mrs. Kim of California. Thank you, Chairman. I want to 
thank all the witnesses for staying with us this long.
    You know, as I serve as chairwoman of the Indo-Pacific 
Subcommittee it is really important that, you know, we carry on 
our priorities not only from the subcommittee but overall 
committee to, you know, give our allies the tools and resources 
they need so they can counter the Belt and Road Initiative and 
other types of economic coercion, and our strategy for 
countering the Belt and Road Initiative must also include how 
we can bring the full force of the American private sector to 
compete with the CCP-owned and affiliated companies.
    Pacific Islands, for example, it's very, very essential to 
the success of the Belt and Road Initiative, especially given 
their strategic importance to the United States and its allies, 
and combined with overt political pressure and bribery the CCP 
is successfully using the economic leverage over Pacific 
Islands to achieve their political goals.
    So most notably, you know, the Solomon Islands they joined 
BRI in 2019 and severed their ties with Taiwan and last year 
they announced a security agreement with PRC that would allow 
the PLA to station personnel and assets in the Solomon Islands. 
This is very concerning to me.
    But, Mr. Herscowitz, what projects is DFC undertaking in 
the Pacific Islands and do you coordinate those projects with 
Foreign Commercial Service?
    Mr. Herscowitz. So I mentioned the project that we're doing 
in Papua New Guinea in collaboration with the Australians and 
the Japanese, a $50 million guarantee to upgrade to 5G network 
there as well.
    We have someone who's based in Indo-Pacific who travels 
frequently to the Indo-Pacific Islands and I actually speak to 
him on a fairly regular basis. Because a lot of the 
transactions in these small--in the smaller islands tend to be 
small and we're private sector driven so we're always looking 
for creative opportunities about how we can make sure that 
financing goes where it needs to go.
    In a country with a population of 100,000, 200,000 people 
there aren't the same large-scale projects that you might find 
in other countries and so we're looking at how we can work 
potentially with regional development banks to make sure that 
small businesses are getting the financing that they need as 
well.
    Mrs. Kim of California. I want to--I want to continue that 
and then I want to ask Mr. Venkataraman can you describe the 
FCS engagement in the Pacific Islands and what are the biggest 
challenges the American sector faces in engaging in more 
commercial activity in the Pacific Islands?
    Mr. Venkataraman. Thank you, Congresswoman.
    We are very focused on shifting the dynamic in our 
relationship with the Pacific Islands and paying much more 
attention and bringing American companies to do business in the 
Pacific Islands.
    As we are in other markets we are out there to make sure 
that the Pacific Islands see us as the partner of choice. But 
as my colleague said it is a heavy lift. We are engaged right 
now--we have staffed--we have added two staff to Fiji and Papua 
New Guinea.
    We are now in the process of negotiating MOUs to strengthen 
our commercial relationship with a number of the Pacific 
Islands and we're looking ahead to additional staffing to see 
if that would assist the efforts of U.S. companies to get into 
those markets.
    However, the problem remains, as my colleague mentioned, 
the size of those markets being as small as they are. In those 
markets even more than in other markets the importance of 
derisking mechanisms such as DFC, such as EXIM, cannot be 
overStated.
    American companies are always eager to do business where 
there's opportunity but where these opportunities do not 
translate into, you know, ways that make it amenable for them 
to do the deals that they want to do we have to find ways to 
bridge that gap. And so that's----
    Mrs. Kim of California. Can you talk about those, like, 
changes or additional tools that you will need for the DFC to 
compete against PRC in those projects and in that region?
    Mr. Venkataraman. Yes. So, I mean, I'll leave it to my 
colleague to amplify, but I think the point is that the DFC 
performs such a critical function that our businesses 
appreciate to take these environments and these economies 
around the world and make them accessible to our businesses by 
virtue of the financing that they provide and by virtue of 
making those projects bankable and it's a critical role that 
DFC plays without which our companies could not engage in most 
markets in the world but all the more so in a small market like 
the Pacific Island countries.
    Mr. Herscowitz. Sorry. So, again, DFC takes a market-driven 
approach. So what we're doing is we're evaluating what is the 
need in the market and who's willing to invest there.
    Now, we want to give it a lot of nudging. We want to work 
with Commerce Department and with others and with our embassies 
to identify opportunities and we really look hard at any 
potential opportunity with frequent travel to the region as 
well to try to identify opportunities where we can have that 
private sector investment that the countries want and need.
    Mrs. Kim of California. Thank you. My time is expired so I 
will yield back. Thanks.
    Chairman McCaul. The gentlelady yields back.
    Let me thank the witnesses for your patience. I know it's 
been a very long afternoon with that long vote series. But this 
has been very valuable and very important.
    You are the counter to the malign influence of China. We 
want to work with you and we want to support you and we want to 
get that full equity. I will do everything in my power to move 
that bill out of this committee.
    And so, again, I want to thank the witnesses. Members may 
have additional questions in writing. I would ask you to 
respond. Members have 5 days to submit statements and questions 
for the record.
    And without objection, the committee stands adjourned.
    [Whereupon, at 6:11 p.m., the committee was adjourned.]

                                APPENDIX

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         STATEMENT FOR THE RECORD FROM REPRESENTATIVE CONNOLLY

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            RESPONSES TO QUESTIONS SUBMITTED FOR THE RECORD

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