A Republican congressman warned about the dangers of foreign companies doing business in China, noting that “Beijing reserves the right to swipe any data, seize any assets, and filch any IP [intellectual property] that it wishes.”
“The government often mandates the creation of [Chinese Communist Party] cells inside firms, and China’s Military-Civil Fusion Policy means any private company can effectively be turned into an arm of the [People’s Liberation Army] or communist intelligence apparatus,” Rep. Mike Gallagher, R-Wis., said at a hearing Thursday titled “Risky Business: Growing Peril for American Companies in China.”
Gallagher, chairman of the Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party, also said, “Every foreign business that enters into China takes on a sometimes silent, sometimes not so silent, business partner: the Chinese Communist Party.”
“The same party that is committing genocide against the Uyghur people in Xinjiang, that has shattered international agreements around Hong Kong, attempted to erase the culture of Tibetans, militarize the South China Sea, and threatens to upset the fragile peace in the Taiwan Strait on a near daily basis,” Gallagher said.
“It’s time for American corporate executives to take off the golden blindfolds and stare with clear eyes at the growing peril of doing business in China,” Gallagher added.
Hearing witnesses included Piper Lounsbury, chief research and development officer at Strategy Risks, Shehzad Qazi, chief operating officer and managing director at China Beige Book International, and Desmond Shum, author of “Red Roulette: An Insider’s Story of Wealth, Power, Corruption, and Vengeance in Today’s China.”
“Like me, many executives with decades of experience trying to work in China have begun to realize that the party’s goals are structured to promote Beijing’s stated objectives to eventually replace American firms and businesses while using them or subjugating them in the near term,” Lounsbury said during the hearing.
“To achieve their goal, the party’s created a set of national development strategies, which rely on theft, coercion, merger-enabled access to U.S. technologies, intellectual property, and data. … Also, shareholders and investors remain unaware or choose not to look at the extent of which these practices exist,” Lounsbury said.
Michael Cunningham, a research fellow in The Heritage Foundation’s Asian Studies Center, said that Americans companies are “finding themselves in a lot of trouble in China right now.” (The Daily Signal is the news outlet of The Heritage Foundation.)
“They saw China as an easy place to do business. They were attracted there by almost a guaranteed return on investment, low operating costs,” Cunningham told The Daily Signal in a phone interview. “And a Chinese government really that desperately needed them and was willing to give all sorts of incentives; and really, a U.S. government that was encouraging them to invest and do business in China.”
“Now, the costs are high. The regulatory environment is increasingly tight. Enforcement is not transparent. … Crackdowns are happening on one sector after another, and the Chinese government, frankly, has bigger priorities than making American companies happy,” Cunningham said.
Bryan Burack, a senior policy adviser for China and the Indo-Pacific at The Heritage Foundation, also weighed in on the dangers for U.S. companies doing business in China.
“Even as China has been decoupling sectors of its economy for years—through economic coercion, intellectual property theft, and market manipulation—U.S. companies and capital are becoming increasingly exposed to the Chinese Communist Party’s human rights abuses, military modernization efforts, and plans to dominate key technologies,” Burack told The Daily Signal in a written statement.
“Alarmingly, the U.S. government still doesn’t have an accurate picture of U.S. financial flows into China or the ventures they are funding. Something has to change. This is exactly the type of issue that Speaker [of the House Kevin] McCarthy created the select committee to address,” Burack added.
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